Without using the formula, find the difference between compound interest and the simple interest on ₹ 16,000 at 9% per annum in 2

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1. Solution!!

   Principal = Rs 16000

   Rate of interest = 9%

   Time = 2 years

   SI = (P × R × T)/100

   SI = (16000 × 9 × 2)/100

   SI = 160 × 9 × 2

   SI = Rs 2880

   Now, let’s find the compound interest without using the formula.

   First year:-

   Principal = Rs 16000

   Rate of interest = 9%

   Time = 1 year

   SI = (P × R × T)/100

   SI = (16000 × 9 × 1)/100

   SI = 160 × 9 × 1

   SI = Rs 1440

   Amount = Principal + SI

   Amount = Rs 16000 + Rs 1440

   Amount = Rs 17440

   Second year:-

   The amount in the first year becomes the principal in the second year.

   Principal = Rs 17440

   Rate of interest = 9%

   Time = 1 year

   SI = (P × R × T)/100

   SI = (17440 × 9 × 1)/100

   SI = 156960/100

   SI = Rs 1569.6

   Amount = Principal + Interest

   Amount = Rs 17440 + Rs 1569.6

   Amount = Rs 19009.6

   CI = Amount in second year – Principal in first year

   CI = Rs 19009.6 – Rs 16000

   CI = Rs 3009.6

   We are supposed to calculate the difference between the compound interest and simple interest.

   CI – SI

   = Rs 3009.6 – 2880

   = Rs 129.6

   Hence, the difference between the compound interest and simple interest is Rs 129.6.

   Abbreviations used:-

   P → Principal

   R → Rate of interest

   T → Time

   SI → Simple interest

   CI → Compound interest

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