Question

Rohit borrows Rs. 86.000 from Arun for two years at 5% per annum simple interest. He immediately lends out this money to Akshay at 5% compound interest compounded annually for the same period. Calculate Rohit's profit in the transaction at the end of two years.

Answer 1

86,000 at 5%

S.I for 2 years.

$S.I=\frac{P\times R\times T}{100}=\frac{86000\times 5\times 2}{100}$= 8600 Rs.

86000 at 5% C.I for 2 years

$C.Ifor1styear=86000\times 5\times 1100=4300$
A = P + C.I = 86000 + 4300 = 90,300
This becomes the P for 2nd year
90,300 at 5%
$C.Iforsecondyear=\frac{90300\times 5\times 1}{100}=4515$
Total C.I = 4300 + 4515 = 8815 Rs.
Rohit has to pay Arun Rs.8600
But Rohit receives from Akshay Rs. 8815

Hence Rohit's profit wil be = 8815 - 8600

= Rs. 215