Simple Interest (SI) formula:

SI = (P × R × Time) / 100

Given values:

P = Rs. 1200

R = 10% per annum

Time = 1 year

SI = (1200 × 10 × 1) / 100

= 120

Compound Interest (CI) formula:

CI = P × (1 + R/n)^n – P

where n = number of compounding periods per year

R/n = half-yearly rate = 10/2 = 5%

CI = 1200 × (1 + 5/100)^2 – 1200

= 1200 × (1.05)^2 – 1200

= 1200 × 1.1025 – 1200

= 1323 – 1200

= 123

Difference between CI and SI:

= CI – SI

= 123 – 120

= 3

The difference between simple interest and compound interest is Rs. 3.