Explanations:Interest is a fee paid by a borrower to a lender for the use of borrowed money. There are two primary methods of calculating interest: Simple Interest (SI) and Compound Interest (CI).
Simple Interest is calculated using the formula:
SI = (P × R × T) / 100
where P is the principal amount, R is the rate of interest per annum, and T is the time period in years.
Compound Interest is calculated using the formula:
CI = P(1 + R/100)^T - P
where P is the principal amount, R is the rate of interest per annum, and T is the time period in years.
For the given problem, we need to find the difference between CI and SI for Rs 200 at 10% p.a. for 2 years.
First, let's calculate the Simple Interest (SI):
SI = (200 × 10 × 2) / 100 = 4000 / 100 = Rs 40
Next, let's calculate the Compound Interest (CI):
CI = 200(1 + 10/100)^2 - 200
CI = 200(1.1)^2 - 200
CI = 200 × 1.21 - 200
CI = 242 - 200 = Rs 42
Now, we find the difference between CI and SI:
CI - SI = 42 - 40 = Rs 2
Alternatively, the difference between CI and SI for 2 years can be calculated using the simplified formula:
CI - SI = P(R/100)^2
CI - SI = 200(10/100)^2
CI - SI = 200 × 0.01 = Rs 2
Therefore, the difference between CI and SI for Rs 200 at 10% p.a. for 2 years is Rs 2.