A man deposits Rs. 5000 in a bank at 12 percent simple interest for 2 years. He also deposits another Rs. 5000 in another bank at the same rate of 12 percent compound interest, compounded annually. Find the difference between the simple interest and the compound interest generated after 2 years.
ARs. 72 ✓ Correct
BRs. 1200
CRs. 1272
DRs. 272
Correct answer: (A) Rs. 72
Explanation
The difference is Rs. 72.
Simple interest = 5000 x 12 x 2 / 100 = Rs. 1200.
Compound amount = 5000 x (1.12)^2 = 5000 x 1.2544 = Rs. 6272.
Compound interest = 6272 - 5000 = Rs. 1272.
Difference = 1272 - 1200 = Rs. 72.
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