Rhea borrowed Rs.12,000 from Mike at 6% per annum simple interest for 2 years. If she had borrowed this sum at 6% per annum compound interest, what extra amount would she have to pay?

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Rs.54.80

Rs.43.20

Rs.21.30

Rs.34.20

answer is B.

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Detailed Solution

We have the following as given,
The amount borrowed by Rhea= Rs. 12,000
Time= 2 years
Rate for Simple Interest= 6% p.a
Rate for Compound interest= 6% p.a
Applying Simple Interest formula,

S I = P R T 100 = 12000 × 6 × 2 100 = 1440

Now, Amount (A) = Principal + Interest
= 12000 + 1440
= 13440
Now calculating the Compound interest:

A = P 1 + R 100 n A = 12000 1 + 6100 2 A = 12000 100 + 6 100 2 A = 120001061002 A = 12000 × 1123610000 A = 13483.2

Extra Amount = Amount Using Compound interest – Amount using Simple interest
= 13483.2-13440
=43.2
Therefore, option 2 is correct.

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