What will be the difference between compound interest (interest is compounded annually) and simple interest on a sum of Rs. 3200 at the rate of 20% per annum for 2 years?
Show answer & explanation
Correct answer: A
Explanation
The correct answer is option 1 i.e. Rs. 128.
Principal = 3200
Rate = 20%
Time = 2 years
S.I. = PRT/100
Successive increase = {a + b + (ab) /100}
S.I. = (3200 × 20 × 2)/100 = 1280
Now, C.I. -
Rate = 20%
Time = 2 years
So, {20 + 20 + (40/100} = 44%
C.I. = 44% of C.I. = 44% of 3200 = (3200 × 44)/100 = 1408
Difference between C.I. and S.I. = 1408 - 1280 = Rs. 128