Question : What is the difference (in Rs.) between the compound interest and simple interest for 3 years on a Principal of Rs.1000 at 20% per annum?
Option 1: Rs. 64
Option 2: Rs. 120
Option 3: Rs. 128
Option 4: Rs. 136
Correct Answer: Rs. 128
Solution :
Given: Principal = Rs. 1000
Rate = 20%
Time = 3 years
Solve by using the formula for 3 years: $D=P×\frac{(300+R)R^{2}}{100^{3}}$, where $D$ = Difference between compound interest and simple interest, $P$ = Principal, $R$ = Rate of interest.
Putting the values in the given formula, we have,
$D=1000×\frac{(300+20)20^{2}}{1000000}$
⇒ $D=\frac{1000×320×400}{1000000}$
⇒ $D=32×4$
⇒ $D$ = Rs. 128
Hence, the correct answer is Rs. 128.
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