Question

Find the difference between compound interest and simple interest on Rs. 20,000 at 5% per annum for 2 years.

Solution

1. For 2 years, CI - SI = P x (R/100)^2.
2. Difference = 20,000 x (5/100)^2.
3. Difference = 20,000 x 25/10,000 = Rs. 50.