A person borrowed Rs.5,000 at 5% rate of interest per annum and immediately lent it at 5.5%. After two years he collected the amount and settled his loan. What is the amount gained by him in this transaction?
Question
A person borrowed Rs.5,000 at 5% rate of interest per annum and immediately lent it at 5.5%. After two years he collected the amount and settled his loan. What is the amount gained by him in this transaction?
Solution
Sure, let's break it down:
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First, we need to calculate the amount of interest the person paid on the loan he took. The formula for simple interest is: Interest = Principal x Rate x Time. In this case, the principal is Rs.5,000, the rate is 5% (or 0.05 when expressed as a decimal), and the time is 2 years. So, the interest paid is: 5000 x 0.05 x 2 = Rs.500.
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Next, we need to calculate the amount of interest the person earned on the loan he gave. The principal is again Rs.5,000, but the rate is 5.5% (or 0.055 when expressed as a decimal). So, the interest earned is: 5000 x 0.055 x 2 = Rs.550.
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Finally, we subtract the interest paid from the interest earned to find the person's gain: 550 - 500 = Rs.50.
So, the person gained Rs.50 in this transaction.
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