 # Harpreet borrowed Rs 20000 from her friend at 12% per annum simple interest.

Question:

Harpreet borrowed Rs 20000 from her friend at 12% per annum simple interest. She lent it to Alam at the same rate but compounded annually. Find her gain after 2 years.

Solution:

Principal amount $=$ Rs. 20000

Simple interest $=$ Rs. $\left(\frac{20000 \times 2 \times 12}{100}\right)=$ Rs. 4800

The compound interest can be calculated as follows :

Principal for the first year $=$ Rs. 20000

Interest for the first year $=$ Rs. $\left(\frac{20000 \times 12 \times 1}{100}\right)=$ Rs. 2400

Now, amount at the end of the first year $=$ Rs. $(20000+2400)=$ Rs. 22400

Principal for the second year $=$ Rs. 22400

Interest for the second year $=$ Rs. $\left(\frac{22400 \times 12 \times 1}{100}\right)=$ Rs. 2688

Now, amount at the end of the second year $=$ Rs. $(22400+2688)=$ Rs. 25088

Hence, compound interest $=$ Rs. $(25088-20000)=$ Rs. 5088

Now, CI $-$ SI $=$ Rs. $(5088-4800)=$ Rs. 288

$\therefore$ The amount of money Harpreet will gain after two years is Rs $288 .$