Fabina borrows Rs. 12,500 at 12% per annum for 3 years at simple interest and Radha borrows the same amount for the same time period at 10% per annum, compound annually. Who pays more interest and by how much?

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Fabina pays Rs. 362.50 more than Radha

Radha pays Rs. 482.50 more than Fabina

Radha pays Rs. 362.50 more than Fabina

Fabina pays Rs. 482.50 more than Radha

answer is A.

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Detailed Solution

Concept- In this question, we will use the formula of simple interest and compound interest as: Question Image

In Fabina case, the given parameters:

Now we will find the interest by substituting the values in the formula.
Question Image

In Radha case, the given parameters: Question Image

We will now find the amount by substituting the values in the formula.
Question Image

Further, we will determine who pays more interest and how much
Question Image

As a result, Fabina pays Rs. 362.50 more.
Hence, the correct answer is option (1).

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