Numerical: simple and compound interest MCQ - Practice Questions with Answers

For two years, the difference between compound interest and simple interest is the interest on the first year’s interest. The formula is P × r² / 100². Here the difference is ₹ 25 and the rate is 5%, so P × 25 / 10000 = 25. Hence P = ₹ 10,000. Amounts of ₹ 8000 and ₹ 9000 would give smaller differences, while ₹ 15,000 would give ₹ 37.50 as the difference, not ₹ 25.