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What is the difference between the compound interest compounded annually and the simple interest on Rs.16,000 for 3 years at 5% per annum?
1. 130
2. 140
3. 150
4. 122

1 Answer

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Correct Answer - Option 4 : 122

Formula:

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

Simple interest = PNR/100

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

Calculation:

Simple interest = 16000 × 3 × 5/100 = Rs.2400

Compound interest = 16000(1 + 5/100)3 - 16000 = Rs.2522

∴ Required difference = 2522 - 2400 = Rs.122

 

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