If a sum of ₹65900 is deposited for 2 years at an interest rate of 10% p.a., then find the difference between compound interest (when interest is compounded annually) and simple interest.

1. A

   ₹659

2. B

   ₹659.7

3. C

   ₹661.7

4. D

   ₹649

Appeared in: DSSSB 12 August 2024

Explanation

• The question asks for the difference between compound interest (CI) and simple interest (SI) over 2 years.
• A direct formula exists for this specific case: Difference = Principal × (Rate/100)². This is the most efficient way to solve the problem.
• Substituting the given values: Principal (P) = ₹65900 and Rate (R) = 10%.
• Calculation: Difference = 65900 × (10/100)² = 65900 × (1/100) = ₹659.

Why Other Options Were Wrong

• Option B: This value is incorrect. It may arise from a miscalculation, such as an error in squaring the rate or a decimal point misplacement.
• Option C: This value is incorrect. It is not obtainable using the correct formulas for simple and compound interest.
• Option D: This value is incorrect. It might result from an arithmetic error during the calculation process.

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Clinical Relevance

• Nursing practice connection: This is primarily an exam-oriented knowledge point with limited direct bedside application, so retain Difference between Compound Interest and Simple Interest as background academic context rather than a clinical decision trigger.
• This is a general aptitude question, not a clinical one. However, financial literacy is a crucial life skill for nursing professionals.
• Understanding basic financial concepts like interest helps in personal financial planning, managing educational or personal loans, and making informed investment decisions.
• What if the interest was compounded half-yearly? The calculation would change. The rate would be halved (5%), the number of periods would be doubled (4), and the simple interest would remain the same. The compound interest would be higher (₹14173.5), leading to a larger difference (₹993.5).

How to Approach the Question

• First, identify all the given parameters from the question: Principal (P = ₹65900), Rate (R = 10% p.a.), and Time (T = 2 years).
• Recognize that the question asks for the difference between compound interest (CI) and simple interest (SI) for a period of 2 years.
• Recall the specific shortcut formula for this scenario: Difference = P × (R/100)², which is the most efficient method.
• Substitute the values into the formula: 65900 × (10/100)².
• Perform the calculation: 65900 × (1/100) = 659.
• Alternatively, calculate SI and CI individually and then find their difference to verify the answer.

Concept Tested & Keywords

• Concept Tested: Difference between Compound Interest and Simple Interest
• Stem keywords: sum, deposited, interest rate, compound interest, simple interest
• Lead-in keywords: find the difference

Question ID

QeUZZm3z_k7DqDxfQHVvXV

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