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Compound Interest
Last updated at Nov. 12, 2018 by Teachoo
Ex 8.3, 3 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? Fabina (Simple Interest) Principal (P) = 12, 500 Rate (R) = 12% per Annum Time (t) = 3 years. Interest (I) = (π Γ π Γ π)/100 = (12500 Γ 12 Γ 13)/100 = 125 Γ 36 = 4500 Radha (Compound Interest) Principal (P) = 12, 500 Rate (R) = 10% per Annum Time (t) = 3 years. Amount (A) = (1+π /100)^π = 12500 (1+10/100)^3 = 12500 (1+1/10)^3 = 12500 ((10 + 1)/10)^3 = 12500 (11/10)^3 = 12500 ((11 Γ 11 Γ 11)/(10 Γ10 Γ10)) = 12500 ((121 Γ 11)/1000) = (125 Γ 1331)/10 = 166375/10 = 16637.5 Now Amount = Principal + Interest 16637.5 = 12500 + Interest 16637.5 β 12500 = Interest 4137.5 = Interest β΄ Interest = 4137.5 β΄ Interest paid by Fabina = Rs 4500 & interest Paid by Radha = Rs 4137.5 Since 4500 > 4.137.5 β΄ Fabina Paid more interest than Radha. Also, Interest paid by Fabina β Interest Paid by Radha = 4500 β 4137.5 = 362.50 β΄ Fabina pays Rs 362.50 more than Radha