Question : Find the difference between compound interest and simple interest when a sum of Rs. 15,625 is invested for 3 years at 4% per annum.
Option 1: Rs. 76
Option 2: Rs. 96
Option 3: Rs. 56
Option 4: Rs. 86
Correct Answer: Rs. 76
Solution :
Difference between simple interest and compound interest for 3 years$= P(3 + \frac{R}{100})(\frac{R}{100})^2$
where, $P$ = principal amount, $R$ = rate of interest.
Given that $P$ = Rs. 15,625, $R$ = 4% per annum, and $T$ = 3 years
⇒ Difference = 15625 × (3 + $\frac{4}{100})(\frac{4}{100})^2$
= 15625 × ($\frac{76}{25})(\frac{1}{625})$
= Rs. 76
Hence, the correct answer is Rs. 76.
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