Kiran lent Rs.5,00,000 to Kishore, which gets compounded annually at the rate of 12% per annum. Kishore lent the amount to Kavya on simple interest at the rate of 15% per annum. What is the difference in the interest earned by Kiran and Kishore after 3 years?
Show answer & explanation
Correct answer: A
Explanation
The Correct answer is Option 1 i.e. Rs.22,536.
Interest earned from Kiran
C.I. = P(1 + R/100)T - P
where, C.I. = Compound Interest, P = Principal, R = Rate and T = Time
⇒ C.I. = 500000(1 + 12/100)3 - 500000
⇒ C.I. = 500000(112/100 × 112/100 × 112/100 - 1)
⇒ C.I. = 500000(1404928 - 1000000)/1000000
⇒ C.I. = 500000(404928)/1000000
⇒ C.I. = Rs.202464
Interest earned from Kishor
S.I. = (P × R × T)/100
where, S.I. = Simple Interest, P = Principal, R = Rate, and T = Time
⇒ S.I. = (500000 × 15 × 3)/100
⇒ S.I. = (500000 × 15 × 3)/100
⇒ S.I. = Rs.225000
Difference = 225000 - 202464 = Rs.22536