A person borrows Rs. 5000 for 2 year at 4% p.a. simple interest. He immediately lends it to another person at $$6\frac{1}{4}$$ % p.a. for 2 years. Find his gain in the transaction per year.
a) Rs. 112.50
b) Rs. 125
c) Rs. 150
d) Rs. 167.50
Answer: a
Explanation:
$$\eqalign{
& {\text{Gain in 2 years}} \cr
& = {\left( {5000 \times \frac{{25}}{4} \times \frac{2}{{100}}} \right) – \left( {\frac{{5000 \times 4 \times 2}}{{100}}} \right)} \cr
& = {\text{Rs}}{\text{.}}\left( {625 – 400} \right) \cr
& = {\text{Rs}}{\text{. }}225 \cr
& {\text{Gain 1 year}} = {\text{Rs}}{\text{.}}\left( {\frac{{225}}{2}} \right) \cr
& = {\text{Rs}}{\text{. }}112.50 \cr} $$
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