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Question
Mewa Lal borrowed Rs 20000 from his friend Rooplal at 18% per annum simple interest. He lent it to Rampal at the same rate but compounded annually. Find his gain after 2 years.
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Solution
SI for Mewa Lal \[= \frac{\text{ PRT }}{100}\]
\[ = \frac{20, 000 \times 18 \times 2}{100}\]
= Rs 7, 200
Thus, he has to pay Rs 7, 200 as interest after borrowing.
CI for Mewa Lal = A - P
\[ = 20, 000 \left( 1 + \frac{18}{100} \right)^2 - 20, 000\]
\[ = 20, 000 \left( 1 . 18 \right)^2 - 20, 000\]
= 27, 848 - 20, 000
= Rs 7, 848
He gained Rs 7, 848 as interest after lending.
His gain in the whole transaction = Rs 7, 848 - Rs 7, 200
= Rs 648
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