Find the difference between compound interest and simple interest on Rs.8000 for 3.5years @ 6%per annum.

Question

Amount=P (1+R/100)^n CI = A -P SI= (P×R×T)/100 Answer is 131

Answer 1

Simple interest (SI) is 8000*3.5*6/100=80*21=1680.

1. Compound interest (CI) assuming interest compounded annually for 3 years is 8000(1.06)^3-8000=1528.128. Total accumulated is 9528.128. That leaves 6 months which would not be compounded until the next 12 months. Therefore, if we use simple interest for this period it would be calculated ar 3% on 9528.128: 9528.128*3/100=285.84384, added to 9528.128=9813.97184 as the total accumulated, so if we now subtract 8000=1813.97 we have the interest. The difference between this and the simple interest is 1813.97-1680=Rs 133.97.
2. If we use the formula 8000(1.06)^3.5 we get the amount accumulated=9809.808, so interest is 1809.808 and the difference between this and simple interest is Rs 129.81. This lesser amount shows how important it is to discover how interest is going to be applied in an incomplete year.
3. An alternative way to do the calculation is shown in the table below:

Time	Accumulated	Interest
1	8480.00	480.00
2	8988.80	988.80
3	9528.13	1528.13
3.5	9813.97	1813.97

I believe the table illustrates how the interest would be accumulated in practice. So the difference between SI and CI would be Rs 133.97.