Question

Ahmed lent amir Rs8000 at simple interest for 3 years at the rate of 5% per annum. How much more would he have gained if he had lent it at compound interest?

Answer 1

Ahmed could have gained 61 rupees more, if had given had given in compound interest.

Solution:

Given that Ahmed lent amir Rs8000 at simple interest for 3 years at the rate of 5% per annum

Simple Interest calculation:

Principal = 8000

Rate of interest = 5%

Time = 3

Formula:

`S.I=(p* n* r)/(100)`

Where , "p" is the principal and "n" is the number of years and "r" is the rate of interest

Substituting the values in formula,

`S.I = (8000 * 3 * 5)/(100)\\\\S.I = 80 * 3 * 5 = 240 * 5\\\\S.I = 1200`

Compound Interest calculation:

Principal = 8000

Rate of interest = 5% compounded annually

Time = 3

Formula:

`C.I=P(1+(R)/(100))^n-P`

Substituting the values in formula,

`\Rightarrow C.I=8000(1+(5)/(100))^3-8000\\\\\Rightarrow C.I=9261-8000\\\\\Rightarrow C.I=1261`

Therefore, the difference between the interests:

1261 - 1200 = 61

Thus he could have gained 61 rupees more, if had given had given in compound interest.