Question: What is the difference between the compound interest and simple interest on a principal of $1000 at 8% per annum after 2 years?
Options:
Correct Answer: $32
Solution:
SI = 1000 × 0.08 × 2 = $160. CI = 1000(1 + 0.08)^2 - 1000 = 1000(1.1664) - 1000 = $166.40. Difference = $166.40 - $160 = $6.40.
