Question : Find the difference between compound interest (compounding annually) and simple interest on a sum of Rs. 56,000 for two years at 15% per annum.
Option 1: Rs. 1300
Option 2: Rs. 2410
Option 3: Rs. 1100
Option 4: Rs. 1260
Correct Answer: Rs. 1260
Solution :
Given: Principal = Rs. 56,000
Rate = 15%
Time = 2 years
We know that,
$D=P(\frac{r}{100})^2$ where $D$ = Difference between CI and SI, $P$ = Principal, $r$ = Rate of interest.
$⇒D=56000(\frac{15}{100})^2$
$\therefore D=56000\times\frac{3}{20}\times\frac{3}{20}=1260$
Hence, the correct answer is Rs. 1260.
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