Question
A man takes a loan of Rs. 50,000 from a bank at a simple
interest rate of 10% per annum. He immediately lends the same amount to a friend at a compound interest rate of 10% per annum, compounded annually. What is the total profit he earns at the end of 3 years?Solution
Total interest paid by the man to the bank = (50000 X 10 X 3) ÷ 100 = Rs. 15,000
Total interest received by the man from his friend = 50000 X {(1.1) 3 Â - 1} = Rs. 16,550
So, profit earned by the man = 16550 - 15000 = Rs. 1,550
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