Shortcut Trick
Interest for 1st year = 16% of 15,000 = 2,400.
Interest for 2nd year = 2,400 + (16% of 2,400) = 2,400 + 384 = 2,784.
The difference between CI of two consecutive years is the interest on the previous year interest.
Difference = 16% of 2,784 = 0.16 × 2,784 = 445.44.
∴ The correct answer is Rs. 445.44.
Alternate Method
Given:
Principal (P) = Rs. 15,000
Rate (R) = 16% p.a.
Formula Used:
Compound Interest for the nth year = P(1 + R/100)n−1 × (R/100)
Calculations:
⇒ CI for 2nd year (CI2) = 15,000 × (1 + 16/100)2−1 × (16/100)
⇒ CI2 = 15,000 × 1.16 × 0.16 = 2,784
⇒ CI for 3rd year (CI3) = 15,000 × (1 + 16/100)3−1 × (16/100)
⇒ CI3 = 15,000 × (1.16)2 × 0.16
⇒ CI3 = 15,000 × 1.3456 × 0.16 = 3,229.44
⇒ Difference = CI3 − CI2 = 3,229.44 − 2,784 = 445.44
∴ The correct answer is Rs. 445.44.
Additional Information
Relationship between Consecutive Year Interests
In compound interest, the interest for the (n+1)th year is equal to the interest for the nth year plus the interest on that interest: CIn+1 = CIn × (1 + R/100).
Difference between CI and SI for 2 years
The difference between Compound Interest and Simple Interest for 2 years is given by the formula: Difference = P × (R/100)2.
Effective Rate for Compound Interest
For two years, the effective rate of interest is x + y + (xy/100). For 16%, it would be 16 + 16 + (256/100) = 34.56%.