Expert: Ahmed Salami - 12/11/2010

Question
1. Reena and Ruchira borrowed Rs 60000 and Rs 50000
respectively for a period of 3 years. Reena paid simple
interest at the rate of 10%p.a., Ruchira paid compound
interset at the rate of 10% compounded annually. Who paid more
interest and by how much?

Answer
Hi Abhishek,
After 3 years, Reena pays an interest of
I = 60000 . 10 . 3 / 100 = Rs 18000

But Ruchira pays a total amount
A = 50000(1 + 10/100)^3
= 50000(1 + 0.1)^3
= 50000(1.1)^3
= 50000(1.331)
= Rs 66550
which is an interest of Rs 16550

And so Reena pays Rs 1450 more in interest.

Regards