A borrowed a sum of Rs.160000 from B at 10% per annum simple interest. At the same time, he lent the same sum to C at the same rate on compound interest, compounded semi-annually for 2 years. Find the amount (in Rs) earned by A in the whole transaction.
Show answer & explanation
Correct answer: C
Explanation
The correct answer is Option 3 i.e 2481.
A borrowed a sum of ₹160000 from B at 10% per annum simple interest
Interest paid by A to be at the end of 2 years = 160000 × 20/100 = Rs.32000
A lent the same amount to C at the same rate on compound interest, compounded semi-annually for 2 years.
The amount received by A at the end of 2 years from C = 160000(1 + 5/100)4 = Rs.194481
Interest earned by from C = (194481 - 160000) = Rs.34481
Amount earned by A in this whole transaction = (34481 - 32000) = Rs.2481