Question

If the principal, interest rate, and time are identical, you will earn more interest with compound interest than you will with simple interest Question 4 options: True False

Answer 1

The statement is TRUE

Explanation:

To Prove : if principal , interest rate , and time are identical for both compound interest and simple interest , then CI is more than SI .

Let we take the value :

Principal = Rs 1000

Rate of interest = 4%

Time period = 2 year

At First , for compound interest

Amount = Principal
`( 1+ (Rate)/(100))^(Time)`

A = 1000
`( 1+ (4)/(100))^(2)`

So , A = 1000 (
`(26)/(25)`)²

Or, A = 1000 × 1.0816 = 1081.6

So , CI = A - P

CI = 1081.6 - 1000 = Rs 81.6

At second , for simple interest

SI =
`((P * R * T)/(100))`

Or, SI =
`((1000 * 4 * 2)/(100))`

I.e SI = Rs 80

Hence from the above two solution of Compound Interest and Simple Interest , it is proved that interest obtain from CI is more than SI . PROVED