Question

12.

Bharathi borrows an amount of 12500 al 12% per annum for 3 years at a simple inters
and Madhuri borrows the same amount for the same time period at 10% per annum
compounded annually. Who pays more interest and by how much?

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Answer 1

Explanation

For bharathi

Principal,P =Rs 12500

Simple interest Rate,R = 12%

Time period,n = 3 years.

Simple Interest, SI at 12% for 3 years =

(12500×12×3)/100

= Rs 4500

For Madhuri

Principal,P =Rs 12500

Compound interest Rate,R = 10% p.a.

Time period,n = 3 years.

Amount when interest is compounded annually

C.i=A-P

C.i=(1+R/100)^3-p

=12500((1+10/100)^3-12500

=12500(11/10)^3-12500

=[(125×11×11×11)/10×10×10]-12500

=16637.50-12500

=4137.50

Bharathi pays more interest and Rs (4500 - 4137.50) = Rs 362.50 more.