Question

Kushwant borrowed Rs. 12,500 for 3 years @5% annually on simple interest. If same amount is borrowed @ 5% annually on compound interest then what extra amount Khushwant has to pay?

Answer 1

= 14,470.31 – 12,500

= Rs 1,970.31

∴ Khushwant has to pay 

= 1,970.31 – 1,875

= Rs 95.31 more when he borrows at compound interest as compared at simple interest.