Find the difference between the simple interest and the compound interest at an annual rate of 20% on the principal of Rs. 800 for 2 years.
- AOption (a)
32
- BOption (b)
20
- COption (c)
42
- DOption (d)
0
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Correct answer
32
Why this answer is correct
Given:
The principal is 800 rupee
Rate is 20%
Concept:
SI = (P × R × T)/100
CI = P[(1 + r/100)n - 1]
Here, n is the number of terms in the year.
Calculation:
The simple interest for 2 years
⇒ (800 × 20 × 2)/100
⇒ 8 × 20 × 2
⇒ 320 rupee
Now, Compound interest for 2 years is
⇒ 800[(1 + 20/100)2 - 1]
⇒ 800[(120/100)2 - 1]
⇒ 800[(12/10)2 - 1]
⇒ 800 × [(144 - 100)/100]
⇒ 352 rupee
Now, The difference between CI and SI is
⇒ 352 - 320
⇒ 32
∴ The difference between CI and SI is 32.
Shortcut Trick
The difference between CI and SI for 2 years is P(r/100)2
The difference is
⇒ 800(20/100)2
⇒ 800 × (1/5)2
⇒ 32
∴ The difference between CI and SI is 32.
Important Points
This short trick works only for 2 years.