Question

Fabina borrows Rs 12,500 at 12% per annum for 3 years at simple interest and Radha borrows the same amount for the same time period at 10% per annum, compounded annually. Who pays more interest and by how much?

Answer 1

Interest paid by Fabina ` = 12500**12/100**3 = 4500` Rs
Amount repaid by Radha ` = 12500(1+10/100)^3 ` Rs
` = 12500**11/10**11/10**11/10 = 16637.50` Rs So, interest paid by Radha ` = 16637.50-12500 = 4137.50` Rs
So, Fabina paid more interest.