# Mr sharma borrowed rs 20000 from his friend Mr base at the rate of 18% per annum simple interest for 2 years.He lent this money to Mr Gupta at the same rate but compounded annually find his gain after 2 years

2
by Pha

2014-11-01T12:56:22+05:30

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Mr Sharma borrowed Rs. 20000
rate = 18% (simple)
time = 2 years

Total amount he will return to Mr Sharma = 20000+7200 = Rs. 27200

Mr. Sharma lent Rs. 20000
rate = 18% (compound)
time = 2 years
Let the total amount he will get at the end of years = A

Gain = amount he will get - amount he will give
= Rs. 27848 - Rs. 27200
= Rs. 648

2014-11-01T20:23:03+05:30

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The difference between simple interest and compound interest is the interest calculated on the interest accumulated till last year.

Simple Interest for 1 years = 20, 000 * 18/100 * 1 = Rs 3,600

The additional amount gained by compounding interest is
= Rs 3,600 * 18/100 * 1 year  = Rs 648