What is the difference between the amount of interest earned on a principal of Tk. 100 for 2 years at 10% simple interest rate and 10% compounding interest rate?
Solution
Correct Answer: Option D
Simple interest = 100 × 2 × (10/100)
= 20 taka
Compound interest = 100 {1 + (1/10)}2 - 100
= 100 (11/10)2 - 100
= 121 - 100
= 21
∴ Difference = 21 - 20 = 1 taka
= 20 taka
Compound interest = 100 {1 + (1/10)}2 - 100
= 100 (11/10)2 - 100
= 121 - 100
= 21
∴ Difference = 21 - 20 = 1 taka
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