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I borrowed Rs 12,000 from Jamshed at 6% per annum simple interest for 2 years. Had I borrowed this sum at 6% per annum compound interest what extra amount would I have to pay?

4. I borrowed Rs 12,000 from Jamshed at 6% per annum simple interest for 2 years. Had I borrowed this sum at 6% per annum compound interest, what extra amount would I have to pay? 

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Given,

Principal,P =Rs 12000 

Simple interest Rate,R = 6% p.a.

Time period,n = 2 years. 

\therefore Simple Interest, SI at 6% for 2 years =

             =2\times\frac{12000\times6}{100} = Rs 1440

If he would have borrowed it at a compound interest Rate, R = 6% p.a.

We know, Amount when interest is compounded annually, A =

A = P(1+\frac{R}{100})^n

\therefore A = 12000(1+\frac{6}{100})^2= Rs 13483.20 

\therefore Compound\:\: Interest, CI = A - P = Rs \:(13483.20 - 12000) = Rs\: 1483.20

 

\therefore He would have to pay Rs (1483.20 - 1440) = Rs 43.20 extra.

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