Q. 34.2( 232 Votes )

Fabina borrows Rs 12,500 at 12% per annum for 3 years at simple interest and Radha borrows the same amount for the same time period at 10% per annum, compounded annually. Who pays more interest and by how much?

Answer :

For Fabina Principal (P) = Rs.12,500, Time, (T) = 3 years, Rate of interest (R) = 12% p.a.

Simple Interest for Fabina = PRT/100

= Rs. 4,500

Interest paid by Fabina = Rs. 4500

For Radha, P = Rs. 12,500, R = 10% and n = 3 years

Amount for Compound interest is given by

where, p = principal, r = rate of interest and t = time period.

= Rs. 16,637.50

So the Amount for Radha = Rs. 16637.50

Now Compound Interest = Amount - Principal

∴ C.I. for Radha = A – P

= Rs. 16,637.50 – Rs. 12,500 = Rs. 4,137.50

Here, Fabina pays more interest

Difference of interests = Rs. 4,500 – Rs. 4,137.50 = Rs. 362.50

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