I borrowed ₹ 12,000 from Jamshed at 6% per annum simple interest for 2 years. Had I borrowed this sum at 6% per annum compound interest, what extra amount would I have to pay?

We have given data : P = ₹ 12,000, R = 6% p.a. and n = 2 years
So, SI for 4 months =\(\frac{P \times R \times n}{100\times 12}\)

=\(\frac{12,000\times 6 \times 2}{100}\)

=\(₹ 1440 \)

Therefore we have, CI=A - P

=\(P(1+\frac{R}{100})^n\)-P

=\(12,000(1+\frac{6}{100})^2\)-12,000

=\(12,000(\frac{53}{50})^3\)-12,000

=\(12,000\times (\frac{53}{50}\times \frac{53}{50})\)-12,000

=\(12,000\times (\frac{2809}{2500})\)-12,000

=\(12,000 \times (\frac{2809}{2500}-1)\)

=\(12,000 \times (\frac{2809-2500}{1000})\)

=\(12,000 \times (\frac{309}{2500})\)

=\(\frac{7416}5 = ₹ 1483.20 \)

So, the difference between the two interests = ₹ 1483.20 – ₹ 1440 = ₹ 43.20

Hence, Fabina pays more interest by ₹ 43.20.