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The difference between simple interest and compound interest for 2 years at 10% per annum on a principal of ₹5000 is:
₹50
₹100
₹25
₹75
₹50
The difference between compound interest and simple interest for 2 years can be directly found using the formula D=1002P×R2. Substituting the principal P=5000 and rate R=10%, the difference comes out to be ₹50.
The difference between compound interest and simple interest for 2 years can be directly found using the formula D=1002P×R2. Substituting the principal P=5000 and rate R=10%, the difference comes out to be ₹50.
Think of simple interest as a fixed monthly salary addition, while compound interest is like an investment that reinvests its dividends to grow exponentially faster.
SI=100P×R×T — Simple Interest formula
D=1002P×R2 — Difference between CI and SI for 2 years
Simple interest is calculated strictly on the initial principal every year, whereas compound interest adds previous interest to the principal, earning interest upon interest. The 2-year difference specifically represents the interest earned on the first year's interest amount.
Simple interest is linear and constant across equal time intervals.
Compound interest grows non-linearly due to the compounding effect.
Financial planning and banking
Loan and investment growth evaluations
Option A is ₹50, which matches the calculated value.
Options B, C, and D are incorrect alternative values resulting from calculation errors.
A is correct — The difference between simple and compound interest for 2 years at 10% per annum on ₹5000 is ₹50.
Memorizing direct shortcut formulas for 2-year and 3-year CI-SI differences helps solve quantitative aptitude questions rapidly in RRB CBT-1 exams.
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