What is the difference between compound interest and simple interest on a principal of 4,000 BDT at 5% per annum for 2 years?
Answer and explanation
Correct answer: D. 10 BDT
- Step 1: Two-year difference formula between CI and SI: Diff = P (r / 100)^2. Step 2. Substitute values: Diff = 4,000 (5 / 100)^2 = 4,000 (1/20)^2 = 4,000 (1 / 400) = 10 BDT. Answer: 10 BDT. Why not the others: 20 BDT doubles the difference; 15 BDT uses rate 6.12%; 8 BDT is an arithmetic mistake.
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