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Sunil and Kamal took loan of ₹40,000 each for 1 year 6 months from a moneylender who charged simple interest from Sunil @ 11% per annum and compound interest from Kamal @ 10% per annum compounded semi-annually. Who paid more interest and by what amount?

This question was previously asked in
RRB NTPC 2019 CBT 1 Question Paper PDF (31-Jan-2021) (Shift 1)
The correct answer is
Sunil paid ₹295 more

Sunil's Simple Interest Calculation

The principal amount (P) is ₹40,000.

The rate of simple interest (R) is 11% per annum.

The time period (T) is 1 year 6 months, which is equal to 1.5 years.

The formula for Simple Interest (SI) is:

$ \text{SI} = \frac{P \times R \times T}{100} $

Plugging in the values:

$ \text{SI}_{\text{Sunil}} = \frac{40000 \times 11 \times 1.5}{100} $

$ \text{SI}_{\text{Sunil}} = 400 \times 11 \times 1.5 = 6600 $

Sunil paid ₹6,600 as simple interest.

Kamal's Compound Interest Calculation

The principal amount (P) is ₹40,000.

The annual interest rate is 10%.

Interest is compounded semi-annually, meaning twice a year (n=2).

The interest rate per compounding period (r) is $\frac{10\%}{2} = 5\% = 0.05$.

The time period (T) is 1 year 6 months, which is 1.5 years.

The total number of compounding periods (nt) is $2 \times 1.5 = 3$.

The formula for the Amount (A) in compound interest is:

$ A = P(1 + r)^{nt} $

Substituting the values:

$ A = 40000 \times (1 + 0.05)^3 $

$ A = 40000 \times (1.05)^3 $

$ A = 40000 \times 1.157625 = 46305 $

The Compound Interest (CI) is calculated as Amount - Principal:

$ \text{CI}_{\text{Kamal}} = 46305 - 40000 = 6305 $

Kamal paid ₹6,305 as compound interest.

Comparison of Interest Paid

Sunil's simple interest = ₹6,600

Kamal's compound interest = ₹6,305

To find who paid more, we compare the amounts:

₹6,600 > ₹6,305

The difference in interest paid is:

$ \text{Difference} = 6600 - 6305 = 295 $

Therefore, Sunil paid more interest than Kamal by ₹295.

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Important Questions from Interest

  1. The difference between compound interest and simple interest on an amount of Rs.25,000 for 2 years is Rs.250. What is the rate of interest per annum? (In %)
  2. Increase in Debt-Equity ratio in a firm __________ to equity holders.
  3. The difference between the compound interest and simple interest on a certain amount at 5%per annum for 2 years is Rs. 15.The principal amount is equal to :

  4. Dhoni invested Rs 22000 at 12% simple interest per annum and Rs 15000 at 10% compound interest per annum, then find the total amount earned by him at the end of 2 years.

  5. The difference between the compound interest and the simple interest on a sum of Rs. 8,000 for 2 years at the rate of 5% p.a. is:

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