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Find the difference between the compound interest and simple interest on Rs. 25,000 for 2 years at the rate of 5% per annum.
1. Rs. 62.5
2. Rs. 125
3. Rs. 75.5
4. Rs. 150

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Correct Answer - Option 1 : Rs. 62.5

Given:

The principal is Rs. 25,000

Rate is 5% per annum

Time is 2 years

Formula used:

SI - CI = P(R/100)2

where SI = Simple Interest, CI = Compound interest, P = Principal, R = Rate

Calculations:

Principal is Rs. 25,000

Rate is 5% per annum

Difference between the compound interest and simple interest is 

⇒ SI - CI = P(R/100)2

⇒ SI - CI = 25,000 × (5/100)2

⇒ SI - CI = (25,000 × 25)/10,000

⇒ SI - CI = 6,25,000/10,000

⇒ SI - CI = 62.5

∴ The Difference between the compound interest and simple interest is Rs. 62.5

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