Given:
Present value= ₹ 5000
Interest rate= 9% per annum
Time=2 years
Now find compound interest,
To find the amount we have the formula,
Amount (A) = P (1+(R/100))n
Where P is present value, r is rate of interest, n is time in years.
Now substituting the values in above formula we get,
∴ A = 5000 (1 + 9/100)2
⇒ A = 5000 (109/100)2
⇒ A = 5000 (1.09)2
⇒ A = 5000 (1.1881)
⇒ A = ₹ 5940.5
∴ Compound interest = A – P
= 5940.5 – 5000 = ₹ 940.5
Now find the simple interest,
Simple interest (SI) = PTR/100
Where P is principle amount, T is time taken, R is rate per annum
SI = (5000 × 2 × 9) / 100
= 50 × 2 × 9
= ₹ 900
Difference between compound interest and simple interest is = (CI – SI)
= 940.5 – 900
= ₹ 40.5
