Question 32 of 45intermediate🔧 ApplyNumerical4 marks

The post office offers an interest of 7% p.a. How much interest would one get if one invests ₹50,000 for 3 years without compounding? How much more would one get if it was compounded?

Correct Answer

Without compounding: Interest = ₹50,000×0.07000 \times 0.07 × 3 = ₹10,500

With compounding: Amount = ₹50,000 × (1.07)³ = ₹50,000×1.225043000 \times 1.225043 = ₹61,252.15 Interest = ₹61,252.15 - ₹50,000 = ₹11,252.15

Difference: Extra interest = ₹11,252.15 - ₹10,500 = ₹752.15

Exercise: Figure it Out (Section 4) | Q: 5 | (Chapter: Page 24)
For More Understanding

Explanation

The chapter compares simple and compound interest. Simple interest uses linear formula P × r × t, while compound interest uses exponential formula P × (1+r)^t.

Solution Steps

  1. Without compounding:

  2. Interest = 50,000×0.07000 \times 0.07 × 3 = ₹10,500

  3. With compounding:

  4. Amount = 50,000 × (1.07)³ = 50,000×1.225043000 \times 1.225043 = ₹61,252.15

  5. Interest = 61,252.15 - 50,000 = ₹11,252.15

  6. Extra = ₹11,252.15 - ₹10,500 = ₹752.15

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