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Question

# Rohit borrows Rs86,000 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.

Hint:

### Find the total amount to be paid by each person at the end of 2 years and then find the profit.

## The correct answer is: 215 Rupees

### Complete step by step solution:

Case I

Money borrowed from Arun by Rohith = P = 86000 Rupees.

Here we have rate of simple interest R = 5% and number of years T = 2 years.

Interest to be paid by Rohith,

We calculate simple interest by the formula,…(i)

where P is Principal amount, T is number of years and R is rate of interest

On substituting the known values in (i), we get Rupees.

Amount at the end of 2 years = 86000 + 8600 = 94600 Rupees.

Case II

Let the principal amount = P

Here we have rate of simple interest R = 5% and number of years T = 2 years.

We know that

Amount to be paid by Akshay,

So, total amount after second year =

Rupees.

∴Rohith’s profit = 94815 - 94600 = 215 Rupees

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