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      Question

      Suresh lent Rs. 20,000 to Mohit at compound interest of

      25% p.a. (compounded annually) for 2 years. Mohit paid interest using simple interest instead. Find the difference in interest.
      A Rs. 1000 Correct Answer Incorrect Answer
      B Rs. 1250 Correct Answer Incorrect Answer
      C Rs. 1500 Correct Answer Incorrect Answer
      D Rs. 1200 Correct Answer Incorrect Answer
      E Rs. 800 Correct Answer Incorrect Answer

      Solution

      Amount due at the end of 2 years
      = 20000 ├Ч {1 + (25/100)}┬▓
      = 20000 ├Ч (1.25)┬▓
      = 20000 ├Ч 1.5625
      = Rs. 31,250 So, interest due = 31,250 тИТ 20,000 = Rs. 11,250 Simple interest due after two years
      = (20,000 ├Ч 25 ├Ч 2) ├╖ 100
      = Rs. 10,000 So, loss incurred
      = 11,250 тИТ 10,000
      = Rs. 1,250

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