What is the difference between the compound interest and the simple interest on ₹500 for 2 years at 20% per year?

💡 Solution & Explanation

For 2 years, compound interest is more than simple interest only because of the interest on the first year's interest. That extra = principal × (rate/100)² = 500 × (20/100)² = ₹20. You can check by working out both: simple interest is ₹200 and compound interest is ₹220.