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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 × {1 + (25/100)}²
    = 20000 × (1.25)²
    = 20000 × 1.5625
    = Rs. 31,250 So, interest due = 31,250 − 20,000 = Rs. 11,250 Simple interest due after two years
    = (20,000 × 25 × 2) ÷ 100
    = Rs. 10,000 So, loss incurred
    = 11,250 − 10,000
    = Rs. 1,250

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