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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?
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Solution
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 1st 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 2nd 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
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