Question 28 of 45intermediate🔍 AnalyzeEssay2 marks

Do you observe anything interesting in the solutions of the two questions above? Share and discuss.

Correct Answer

Key Observation: Compound interest always yields more than simple interest over multiple periods.

The difference grows larger with: (1) higher interest rates (2) longer time periods (3) larger principal amounts

Question 1: Difference = ₹200 over 2 years at 10%.

Question 2: Difference = ₹310.13 over 4 years at 5%.

Conclusion: Even though the rate was lower in Q2, the longer time period resulted in a larger difference due to the exponential nature of compound growth.

Exercise: Figure it Out (Section 4) | Q: 3 | (Page Page 23)
For More Understanding

Explanation

The chapter encourages students to observe patterns. Compound interest demonstrates exponential growth where interest earns interest, while simple interest shows linear growth.

Solution Steps

  1. Identify that compound interest yields more than simple interest over multiple periods.

  2. Note the factors that increase the difference: higher rates, longer time, larger principal.

  3. Compare the differences from both questions (₹200 vs ₹310.13).

  4. Explain why longer time had greater impact than higher rate due to exponential growth.

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