#### 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.

#### Solution

Given, P = Rs. 86000

R = 5%

T = 2 years

S.I = `(P xx R xx T)/100 = (86000xx5xx2)/100 = Rs 8600`

`C.I = P[(1 + r/100)^2 - 1] = 86000[(1 + 5/100)^2 - 1] = 86000 41/(20xx20) = Rs 8815`

Rohit’s profit = Rs. (8815 – 8600) = Rs. 215

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#### APPEARS IN

Solution 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. Concept: Compound Interest as a Repeated Simple Interest Computation with a Growing Principal.