(Formula Used:
1. SI = \(P × R× T\over100\)
For CI
2. A = P × (1 + \(R\over 100\))T
3. CI = A - P
Where, P = Principal, R = Rate, T = Time, A = Amount
4. Effective rate = r1 + r2 + \(r_1 × r_2 \over 100\)
Where “r1” and “r2” are rates of interest during successive years
Concept Used:
SI and CI for the first year is the same. The difference in the CI and SI for 2 years is due to the compounding part of the interest for the first year.
Calculation:
According to the question
SI for 2 years = ₹ 1,080
⇒ SI for 1 year = ₹ 1,080 ÷ 2 = ₹ 540
Difference between CI and SI for 2 years
⇒ ₹1,128.6 - ₹1,080 = ₹48.6
Using SI formula
⇒ R = \(48.6× 100\over540× 1\) = 9%
Calculating principal using the SI formula
⇒ P = \(1080× 100\over9× 2\) = ₹ 6000
Effective compound interest rate for 2 years
⇒ 9 + 9 +\(9 × 9\over100\) = 18.81%
Effective compound interest rate for 3 years
⇒ 18.81 + 9 + \(18.81 × 9\over100\) = 27.81 + 1.6929 = 29.5029%
Effective simple interest rate for 3 years = 3 × 9 = 27%
Since the difference in the interest would be due to the difference in the rate component
⇒ Difference in the interest rate = 29.5029% - 27% = 2.5029%
⇒ Difference in the interest at 2.5029% = \(6000× 2.5029× 1\over100\) = ₹150.174
∴ The difference in the interest is ₹ 150.174.
Alternate Method Formula Used:
For 2 years, CI - SI = P × (R/100)2
For 3 years, CI - SI = P × (R/100)2 × (300 + R)/100
Calculation:
SI for 2 years = ₹ 1,080
⇒ SI for 1 year = ₹ 1,080 ÷ 2 = ₹ 540
Difference between CI and SI for 2 years
⇒ ₹1,128.6 - ₹1,080 = ₹48.6
Using SI formula
⇒ R = \(48.6× 100\over540× 1\) = 9%
Calculating principal using the SI formula
⇒ P = \(1080× 100\over9× 2\) = ₹ 6000
Now, according to the formula for 3 years
CI - SI = 6000 × (9/100)2 × (300 + 9)/100
⇒ CI - SI = 6000 × (81/10000) × 309/100
⇒ CI - SI = 150.174
∴ The correct answer is option 3