Calculate the difference between the simple interest and compound interest on ₹ 4000 in 2 years at 8% per annum compounded yearly.

For S.I. :

P = ₹ 4000

T = 2 years

R = 8%

S.I. = $\dfrac{P \times R \times T}{100} = \dfrac{4000 \times 8 \times 2}{100}$ = ₹ 640.

For C.I. :

For 1st year :

P = ₹ 4000

T = 1 year

R = 8%

I = $\dfrac{P \times R \times T}{100} = \dfrac{4000 \times 8 \times 1}{100}$ = ₹ 320.

Amount = P + I = ₹ 4000 + ₹ 320 = ₹ 4320

For 2nd year :

P = ₹ 4320

T = 1 year

R = 8%

I = $\dfrac{P \times R \times T}{100} = \dfrac{4320 \times 8 \times 1}{100}$ = ₹ 345.60

C.I. = ₹ 320 + ₹ 345.60 = ₹ 665.60

Difference between C.I. and S.I. = C.I. - S.I. = ₹ 665.60 - ₹ 640 = ₹ 25.60

Hence, difference between C.I. and S.I. = ₹ 25.60