Arithmetic Ability
Compound Interest

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Q.

The difference between compound interest and simple interest on a sum for two years at 8% per annum, where the interest is compounded annually is Rs.16. if the interest were compounded half yearly , the difference in two interests would be nearly

View Answer

Correct choice: A

Explanation:

For 1st year S.I =C.I. Thus, Rs.16 is the S.I. on S.I. for 1 year, which at 8% is thus Rs.200 i.e S.I on the principal for 1 year is Rs.200 Principle = Rs.100*200/8*1 = Rs.2500 Amount for 2 years, compounded half-yearly Rs.[2500*(1+4/100)4]=Rs.2924.4 C.I = Rs.424.64 Also, S.I=Rs.(2500*8*2/100)=Rs.400 Hence, [(C.I) - (S.I)] = Rs. (424.64 - 400) = Rs.24.64
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