A man takes a loan at 5% simple interest for a period of 2 years. He i

A man takes a loan at 5% simple interest for a period of 2 years. He immediately gives this money on loan at 5% compound interest for 2 years. What is the amount of loan he has taken if he makes a profit of ₹ 2,100 ?

Join Our Telegram Channel

₹ 8,00,000

₹ 4,20,000

₹ 1,00,000

₹ 8,40,000

Answer is Right!

Answer is Wrong!

This question was previously asked in

UPSC CISF-AC-EXE – 2023

Download PDF Attempt Online

Let the principal amount be P. The simple interest (SI) paid by the man for 2 years at 5% is SI = (P * 5 * 2) / 100 = 0.10P. The compound interest (CI) received by the man for 2 years at 5% is CI = P(1 + 5/100)^2 – P = P(1.05)^2 – P = P(1.1025) – P = 0.1025P. The man’s profit is the difference between the CI received and the SI paid: Profit = CI – SI = 0.1025P – 0.10P = 0.0025P. Given the profit is ₹ 2,100, we have 0.0025P = 2100. Solving for P: P = 2100 / 0.0025 = 2100 / (1/400) = 2100 * 400 = ₹ 8,40,000.

– Simple Interest formula: SI = PRT/100.
– Compound Interest formula: CI = Amount – Principal = P(1 + R/100)^T – P.
– The profit in this scenario is the difference between the interest earned (CI) and the interest paid (SI).
– Set up an equation with the profit difference equal to the given profit amount and solve for the principal P.

This question tests the understanding of simple and compound interest calculations and how to find the profit earned by an intermediary who borrows at one rate/type and lends at another rate/type. The difference in interest earned versus interest paid constitutes the profit.

More similar MCQ questions for Exam preparation:-