Question:
Mewa Lal borrowed Rs 20000 from his friend Rooplal at 18% per annum simple interest. He lent it to Rampal at the same rate but compounded annually. Find his gain after 2 years.
Solution:
SI for Mewa Lal $=\frac{\text { PRT }}{100}$
$=\frac{20,000 \times 18 \times 2}{100}$
$=\operatorname{Rs} 7,200$
Thus, he has to pay Rs 7,200 as interest after borrowing.
CI for Mewa Lal $=\mathrm{A}-\mathrm{P}$
$=20,000\left(1+\frac{18}{100}\right)^{2}-20,000$
$=20,000(1.18)^{2}-20,000$
$=27,848-20,000$
$=\operatorname{Rs} 7,848$
He gained Rs 7,848 as interest after lending.
His gain in the whole transaction $=$ Rs $7,848-$ Rs 7,200
$=$ Rs 648