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.

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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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