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Find the difference between Compound Interest and Simple Intereston Rs 45,000 at 12% per annum for 5 years.?
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Find the difference between Compound Interest and Simple Intereston Rs...
The main difference between compound interest and simple interest on Rs 45,000 at 12% per annum for 5 years is the way in which interest is calculated and compounded over time.
With simple interest, the interest is only calculated on the initial principal amount of Rs 45,000. This means that the interest earned each year is fixed, and does not change over the duration of the loan. For example, with a 12% simple interest rate, the interest earned each year on Rs 45,000 would be Rs 5,400 (12/100 x 45,000). Over a 5-year period, the total interest earned with simple interest would be Rs 27,000 (5 x 5,400), and the total amount payable at the end of the loan would be Rs 72,000 (45,000 + 27,000).
With compound interest, on the other hand, the interest is calculated not only on the initial principal amount, but also on the accumulated interest from previous periods. This means that the interest earned each year increases over time, as it is calculated on a larger and larger amount. For example, with a 12% compound interest rate, the interest earned in the first year on Rs 45,000 would be Rs 5,400, as with simple interest. However, in the second year, the interest would be calculated not only on the initial principal amount of Rs 45,000, but also on the accumulated interest from the first year, which would be Rs 5,400. This means that the total interest earned in the second year would be Rs 5,928 (12/100 x (45,000 + 5,400)), which is higher than the interest earned in the first year. This pattern continues over the duration of the loan, with the interest earned each year increasing as it is calculated on a larger and larger amount.
Overall, the main difference between compound interest and simple interest is that compound interest is calculated on the principal amount plus any accumulated interest from previous periods, while simple interest is only calculated on the principal amount. This means that compound interest tends to earn more interest over time, as the interest earned each year increases as it is calculated on a larger and larger amount.
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Find the difference between Compound Interest and Simple Intereston Rs...
Introduction:
Compound interest and simple interest are two different methods of calculating interest on a principal amount. In this case, we have a principal amount of Rs 45,000 and an interest rate of 12% per annum for a period of 5 years. Let's calculate the difference between compound interest and simple interest and understand the concept in detail.
Simple Interest:
Simple interest is calculated by multiplying the principal amount, interest rate, and time period. The formula for simple interest is:
Simple Interest = (Principal × Rate × Time) / 100
In this case, the principal amount is Rs 45,000, the interest rate is 12%, and the time period is 5 years. Plugging these values into the formula, we can calculate the simple interest.
Simple Interest = (45,000 × 12 × 5) / 100 = Rs 27,000
Compound Interest:
Compound interest is calculated by adding the interest earned at the end of each compounding period back to the principal amount. The formula for compound interest is:
Compound Interest = Principal × (1 + Rate/100)^Time - Principal
In this case, the principal amount is Rs 45,000, the interest rate is 12%, and the time period is 5 years. Plugging these values into the formula, we can calculate the compound interest.
Compound Interest = 45,000 × (1 + 12/100)^5 - 45,000
Using the formula, we can calculate the compound interest.
Compound Interest = 45,000 × (1.12)^5 - 45,000 = Rs 32,622.86
Difference between Compound Interest and Simple Interest:
The difference between compound interest and simple interest can be calculated by subtracting the simple interest from the compound interest.
Difference = Compound Interest - Simple Interest
Difference = 32,622.86 - 27,000 = Rs 5,622.86
Conclusion:
The difference between compound interest and simple interest on Rs 45,000 at 12% per annum for 5 years is Rs 5,622.86. Compound interest takes into account the interest earned in previous periods, resulting in a higher interest amount compared to simple interest. It is important to understand the difference between these two methods of interest calculation to make informed financial decisions.
Compound interest and simple interest are two different methods of calculating interest on a principal amount. In this case, we have a principal amount of Rs 45,000 and an interest rate of 12% per annum for a period of 5 years. Let's calculate the difference between compound interest and simple interest and understand the concept in detail.
Simple Interest:
Simple interest is calculated by multiplying the principal amount, interest rate, and time period. The formula for simple interest is:
Simple Interest = (Principal × Rate × Time) / 100
In this case, the principal amount is Rs 45,000, the interest rate is 12%, and the time period is 5 years. Plugging these values into the formula, we can calculate the simple interest.
Simple Interest = (45,000 × 12 × 5) / 100 = Rs 27,000
Compound Interest:
Compound interest is calculated by adding the interest earned at the end of each compounding period back to the principal amount. The formula for compound interest is:
Compound Interest = Principal × (1 + Rate/100)^Time - Principal
In this case, the principal amount is Rs 45,000, the interest rate is 12%, and the time period is 5 years. Plugging these values into the formula, we can calculate the compound interest.
Compound Interest = 45,000 × (1 + 12/100)^5 - 45,000
Using the formula, we can calculate the compound interest.
Compound Interest = 45,000 × (1.12)^5 - 45,000 = Rs 32,622.86
Difference between Compound Interest and Simple Interest:
The difference between compound interest and simple interest can be calculated by subtracting the simple interest from the compound interest.
Difference = Compound Interest - Simple Interest
Difference = 32,622.86 - 27,000 = Rs 5,622.86
Conclusion:
The difference between compound interest and simple interest on Rs 45,000 at 12% per annum for 5 years is Rs 5,622.86. Compound interest takes into account the interest earned in previous periods, resulting in a higher interest amount compared to simple interest. It is important to understand the difference between these two methods of interest calculation to make informed financial decisions.
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Find the difference between Compound Interest and Simple Intereston Rs 45,000 at 12% per annum for 5 years.?
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Find the difference between Compound Interest and Simple Intereston Rs 45,000 at 12% per annum for 5 years.? for Class 8 2024 is part of Class 8 preparation. The Question and answers have been prepared according to the Class 8 exam syllabus. Information about Find the difference between Compound Interest and Simple Intereston Rs 45,000 at 12% per annum for 5 years.? covers all topics & solutions for Class 8 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Find the difference between Compound Interest and Simple Intereston Rs 45,000 at 12% per annum for 5 years.?.
Find the difference between Compound Interest and Simple Intereston Rs 45,000 at 12% per annum for 5 years.? for Class 8 2024 is part of Class 8 preparation. The Question and answers have been prepared according to the Class 8 exam syllabus. Information about Find the difference between Compound Interest and Simple Intereston Rs 45,000 at 12% per annum for 5 years.? covers all topics & solutions for Class 8 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Find the difference between Compound Interest and Simple Intereston Rs 45,000 at 12% per annum for 5 years.?.
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