The difference between compound interest and simple interest on a sum for 2 years at 10% per annum, when the interest is compounded annually is ₹16. If the interest were compounded half-yearly, the difference in two interests would be:
For first year, S.I. = C.I.
Now, ₹10 is S.I. on ₹100.
So, S.I. on principal for 1 year at 10% is ₹160
Amount for 2 years compounded half yearly
=
∴ C.I. = ₹(1944.81 – 1600) = ₹24.81.
S.I. =
∴ (C.I.) – (S.I.) = ₹(344.81 – 320) = ₹24.81.