Question

A person borrows ₹ 5000 for 2 years at 5% p.a. simple interest. He immediately lends it to another person at 10% p.a for 2 years. Find his gain at the end of two years.

• A. ₹ 500
• B. ₹ 5,000
• C. ₹ 1,000
• D. ₹ 400

Answer 1

The correct option is A ₹ 500

The Simple Interest earned on a sum of ₹ P for a period of T years at the rate of R% p.a S.I is given by $\frac{P\times R\times T}{100}$.

Given, P = ₹ 5,000

Simple Interest earned at the rate of 5% p.a for 2 years
$=\frac{₹5,000\times 5\times 2}{100}=₹500$.

Simple Interest earned at the rate of 10% p.a for 2 years $=\frac{₹5,000\times 10\times 2}{100}=₹1,000$.

Hence, the gain at the end of 2 years = ₹ (1,000 - 500) = ₹ 500.