Question

Govind borrows Rs 18,000 at 10% simple interest. He immediately invests the money borrowed at 10% compound interest compounded half-yearly. How much money does Govind gain in one year?

Answer 1

To calculate S.I.

P = Rs. 18,000; R = 10% and T = 1 year

S.I. = Rs. `[18,000 xx 10 xx 1]/100` = Rs. 1,800

To calculate C.I.
For 1^st half- year:

P = Rs. 18,000; R = 10% and T = `1/2` year

Interest = Rs. `[ 18,000 xx 10 xx 1]/[ 100 xx 2]` = Rs. 900

Amount = Rs. 18,000 + Rs. 900 = Rs. 18,900

For 2^nd year: 

P = Rs. 18,900; R = 10% and T = `1/2` year

Interest = Rs. `[ 18,900 xx 10 xx 1 ]/[ 100 xx 2]` = Rs. 945

Amount = Rs. 18,900 + Rs. 945 = Rs. 19,845

Compound interest = Rs. 19,845 - Rs. 18,000 = Rs. 1,845

His gain = Rs. 1,845 - Rs. 1,800 = Rs. 45