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What will be the difference between simple and compound interest at 10% per annum on a sum of Rs. 1000 after 4 years?

Correct answer: D. Rs. 64.10

  • A. Rs. 31
  • B. Rs. 32.10
  • C. Rs. 40.40
  • D. Rs. 64.10

Explanation

Compound interest after 4 years is Rs. 1000[(1.10)^4 - 1] = Rs. 464.10, whereas simple interest is Rs. 1000 x 10 x 4 / 100 = Rs. 400. Their difference is Rs. 464.10 - Rs. 400 = Rs. 64.10. The likely mistake is choosing option c, Rs. 40.40, from using an incorrect compound amount factor.

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