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Mewalal borrowed Rs. 20000 from his friend Rampal at $18 %$ per annum simple interest. He lent it to Ram at the same rate but compounded annually. Find his gain after 2 years.

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Rs. 648

Rs. 718

Rs. 823

Rs. 412

answer is A.

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Detailed Solution

Given,

Principal (P) = Rs 20 000 Rate (R) = 18 p .a . Time (T) = 2 years

The amount can be calculated by using formula

A = P 1 + R 100 n

Simple interest,

S I = P × R × T 100

S I = P × R × T 100 ⇒ 20000 × 18 × 2 100 ⇒ R s .7200

Hence, Mewalal has to pay Rs 7200 as interest.
Mewalal lent money to Ram compounded,
The formula to calculate the amount is given by

A = P 1 + R 100 n ⇒ A = 20000 1 + 18100 2 ⇒ A = 20000 × 118100 × 118100 ⇒ A = 2 × 118 × 118 ⇒ A = Rs 27848

Therefore, the amount after 2 years is

A =

Rs 27848
Compound interest,

⇒ C I = A − P ⇒ C I = Rs 27848 − Rs 20 000 ⇒ C I = Rs 7848

Therefore, the interest amount Mewalal will get is Rs 7848
Mewalal’s gain is

⇒ R s 7848 − 7200 ⇒ R s 648

Hence, Mewalal’s gain is Rs.648.
Hence, the correct option is 1.

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