What is the difference between the compound interest and simple interest on Rs. 1200 for one year at an annual rate of 10%, when interest is compounded semi-annually?

Explanation

Simple Interest (S.I.) is calculated as (1200 × 10 × 1) / 100 = Rs. 120. Compound Interest (C.I.), compounded half-yearly, is calculated as 1200 × (1 + 0.05)^2 – 1200 = Rs. 123. The difference between C.I. and S.I. is Rs. 123 – Rs. 120 = Rs. 3.