The difference between compound interest and simple interest

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The difference between compound interest and simple interest on ₹ 2500 for 2 years at 4% per annum is

1. ₹ 40
2. ₹ 45
3. ₹ 14
4. ₹ 4

Correct Option: D

Here , Principal = ₹ 2500 , Time = 2 years , Rate = 4%
Using the given formula ,

S.I. =	P × R × T
	100

S.I. = ₹	2500 × 2 × 4	= ₹ 200
	100

C.I. = P			1 +	R		^T	− 1
				100

C.I. = ₹ 2500			1 +	4		²	− 1
				100

C.I. = ₹ 2500			26		²	− 1
			25

C.I. = ₹	(676 − 625)	× 2500
	625

C.I. = ₹	51	× 2500 = ₹ 204
	625

∴ The required difference = C.I. – S.I. = ₹ (204 – 200) = ₹ 4
Second Method to solve this question :
Here, C.I. – S.I.= ? , P = ₹ 2500 , R = 4% , T = 2

C.I. − S.I. = P		R		²
		100

C.I. – S.I. = 2500		4		²
		100

C.I. – S.I. = 2500 ×	1	×	1
	25		25

C.I.–S.I. = ₹ 4