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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.
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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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