Difference between CI and SI — Aptitude Question
Difference between CI and SI: What is the difference between compound and simple interest on ₹5,000 at 8% per annum… Answer and worked solution on CodeKairo.
- Topic: Simple & Compound Interest
- Section: Quantitative Aptitude
- Difficulty: Medium
- Time target: 50 seconds
Question
What is the difference between compound and simple interest on ₹5,000 at 8% per annum for 2 years?
Options
- ₹30
- ₹32
- ₹36
- ₹40
Show the answer and the worked solution
Correct answer: B. ₹32
Worked solution
- For 2 years, CI − SI = P(r/100)² = 5000 × 0.08² = 5000 × 0.0064 = ₹32.
- Check: SI = 800; CI = 5000 × 1.0816 − 5000 = 408 + … = 832. Difference 32. ✓
Answer: ₹32.
The idea
Two-year difference = P(r/100)². Three-year difference = P(r/100)²(3 + r/100). These save a full amount calculation.
Shortcut. The gap is the second year's interest on the first year's interest: the first year earns ₹400, and 8% of 400 = ₹32.
Common trap. ₹40 — squaring 8% as 0.008 instead of 0.0064 (5,000 × 0.008); 0.08² is 0.0064, giving ₹32.
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