Question

Amit borrowed Rs 16000 at \[17\frac{1}{2} \%\] per annum simple interest. On the same day, he lent it to Ashu at the same rate but compounded annually. What does he gain at the end of 2 years?

Answer 1

Amount to be paid by Amit: 
\[\text{ SI }= \frac{PRT}{100}\]
\[ = \frac{16000 \times 17 . 5 \times 2}{100}\]
 = Rs 5, 600
Amount gained by Amit: 
\[A = P \left( 1 + \frac{R}{100} \right)^n \]
\[ =\text{ Rs }16, 000 \left( 1 + \frac{17 . 5}{100} \right)^2 \]
\[ =\text{ Rs }16, 000 \left( 1 . 175 \right)^2 \]
 = Rs 22, 090
We know that: 
CI = A - P
 = Rs 22, 090 - Rs 16, 000
 = Rs 6090
Amit's gain in the whole transaction = Rs 6, 090 - Rs 5, 600
 = Rs 490