Fabina borrows Rs 12,500 at 12% per annum for 3 years at simple intere

1.	Fabina borrows Rs 12,500 at 12% per annum for 3 years at simple interest and Radha borrows the same amount for the same time period at 10% per annum, compounded annually. Who pays more interest and by how much?
Answer» Interest paid by Fabina = P x R x T/100 = Rs (12500 x 12 x 3/100) = Rs 4500 Amount paid by Radha at the end of 3 years = A = P(1 + R/100)ⁿ A = Rs [12500(1 + 10/100)³] = Rs [12500(100 +10/100)³] = Rs (12500 x 110/100 x 110/100 x 110/100) = Rs 16637.50 C.I. = A − P = Rs 16637.50 − Rs 12500 = Rs 4,137.50 The interest paid by Fabina is Rs 4,500 and by Radha is Rs 4,137.50. Thus, Fabina pays more interest. Rs 4500 − Rs 4137.50 = Rs 362.50 Hence, Fabina will have to pay Rs 362.50 more.

Fabina borrows Rs 12,500 at 12% per annum for 3 years at simple interest and Radha borrows the same amount for the same time period at 10% per annum, compounded annually. Who pays more interest and by how much?

Answer»

Interest paid by Fabina = P x R x T/100

= Rs (12500 x 12 x 3/100) = Rs 4500

Amount paid by Radha at the end of 3 years = A

= P(1 + R/100)ⁿ

A = Rs [12500(1 + 10/100)³]

= Rs [12500(100 +10/100)³]

= Rs (12500 x 110/100 x 110/100 x 110/100)

= Rs 16637.50

C.I. = A − P = Rs 16637.50 − Rs 12500 = Rs 4,137.50

The interest paid by Fabina is Rs 4,500 and by Radha is Rs 4,137.50.

Thus, Fabina pays more interest.

Rs 4500 − Rs 4137.50 = Rs 362.50

Hence, Fabina will have to pay Rs 362.50 more.