Mrs Shukla borrowed Rs 60,000 from a money lender at $5 %$ simple interest for 2 years. The money lender deducts the interest that would be due at the end of the period and handed over the balance to Mrs. Shukla. Mrs Shukla deposits the entire amount of money in a bank which pays $5 %$ compound interest p.a. Find the amount of money that Mrs. Shukla will have to add to pay the money back to the money lender.

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Solution

$S I = \frac{P r t}{100} = \frac{600 / 00 \times 5 \times 2}{1 / 00} = R s 6000$
$\begin{matrix} ∴ A m o u n t r e c e i v e d a l t e r d e d u c t i n g i n t e r e s t \end{matrix}} 60000 - 6000 = R s 54000$
After depositing Rs 54000 is a Basic (a) $5 %$ CI She will receive an amount at the end of 2 years
$= A = 54000 (1 + \frac{5}{100})^{2} = 54000 (1.1025) = = R s 59535$
But she has to pay basic Rs 60000 to money leader. Hence, she has to add
$= 60000 - 59535 = R s 465$

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