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      Question

      Amit lent Rs. 25,000 to Rohit at compound interest of

      10% p.a. (compounded annually) for 2 years. Rohit however paid him back at simple interest instead of compound interest. Find the difference in the interest to be received by Amit and interest actually received by him.
      A Rs. 250 Correct Answer Incorrect Answer
      B Rs. 300 Correct Answer Incorrect Answer
      C Rs. 500 Correct Answer Incorrect Answer
      D Rs. 550 Correct Answer Incorrect Answer
      E Rs. 450 Correct Answer Incorrect Answer

      Solution

      Amount due at the end of 2 years
      = 25000 × {1 + (10/100)}²
      = 25000 × (1.1)²
      = 25000 × 1.21
      = Rs. 30,250 So, interest due = 30,250 − 25,000 = Rs. 5,250 Simple interest due after two years
      = (25,000 × 10 × 2) ÷ 100
      = Rs. 5,000 So, loss incurred by Amit
      = 5,250 − 5,000
      = Rs. 250

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