Discussion of Question with ID = 035 under Compound-Interest

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What is the difference in compound interest and simple interest on an amount of Rs. 40000 for a period of 2 years if the rate is 7% p.a. compounded annually?


Rs. 196.


Rs. 296.


Rs. 246.


Rs. 396.

Ans: a

The shortcut formula for the difference between compound and simple interest over a period of 2 years is $Difference = Principal × (\text"rate"/100)^2$, which equals $(40000 × 7^2)/10000$ = Rs. 196.

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