Amit borrowed Rs 16000 at

Amit borrowed Rs 16000 at $17 \frac{1}{2} \%$ per annum simple interest. On the same day, he lent it to Ashu at the same rate but compounded annually. What does he gain at the end of 2 years?


Amount to be paid by Amit:


$=\frac{16000 \times 17.5 \times 2}{100}$

$=\operatorname{Rs} 5,600$

Amount gained by Amit:


$=\operatorname{Rs} 16,000\left(1+\frac{17.5}{100}\right)^{2}$

$=\operatorname{Rs} 16,000(1.175)^{2}$

$=\operatorname{Rs} 22,090$

We know that:


$=\operatorname{Rs} 22,090-\operatorname{Rs} 16,000$

$=\operatorname{Rs} 6090$

Amit’s gain in the whole transaction $=$ Rs $6,090-$ Rs 5,600

$=\operatorname{Rs} 490$


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