The difference between compound and simple interest on Rs. 8000 at 5% p.a. for 3 years is_________?
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Answer: C. Rs 61
Explanation
The three-year difference between compound and simple interest incorporates an additional rate factor. Multiplying the principal by the squared rate and three plus the rate gives the difference. Evaluating the expression for 8000 rupees at 5 percent yields 61 rupees. Three-year difference formula is P times r over 100 squared times 3 plus r over 100. Principal amount invested in the financial product is 8000 rupees. Annual interest rate applied to the principal is 5 percent per annum.
Long-term borrowing cost calculations require accounting for multi-year compounding effects. Actuarial science uses complex interest formulas to project multi-year financial liabilities. Comparing 3-year interest differences helps in evaluating medium-term bond yields. Choosing 50 rupees underestimates the accumulated multi-year compounding difference. Choosing 60 rupees is a close approximation that misses the exact calculated value. Choosing 600 rupees overestimates the interest difference by a factor of ten.
- Subject
- Mathematics
- Category
- Mathematics
- Topic
- —
- Difficulty
- medium
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