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Varun and Madhur invested Rs. 25,000 each in different schemes. Varun earned simple interest at 11% per annum, whereas Madhur earned compound interest at 10% per annum compounded annually. Who received more interest after 2 years and how much?
1. Varun, Rs. 500
2. Madhur, Rs. 250
3. Madhur, Rs. 302.50
4. Varun, Rs. 250

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Correct Answer - Option 4 : Varun, Rs. 250

Given:

Rate of interest = 11%

Formula:

Let P = Principal, R = rate of interest and N = time

Simple interest = PNR/100

Compound interest = P(1 + R/100)n - P

Calculation:

SI earned by Varun = (25000 × 2 × 11)/100 = Rs.5500

CI earned by Madhur = 25000(1 + 10/100)2 - 25000 = Rs.5250

Difference between interests = 5500 - 5250 = Rs.250

∴ Varun earned Rs.250 more interest than Madhur.

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