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

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

Help and you will get 10 points

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