Multiple choice

A man borrows a sum of money at simple interest at the rate of 5% per annum and lends it out at 4% per annum compound interest, payable yearly. Find his net gain or loss at the end of 2 years as a percentage of sum borrowed by him.

  1. 2.52% gain

  2. 2.36% loss

  3. 1.84% loss

  4. 1.48% gain

  5. None of these
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Let sum be 100. SI paid = 5% * 2 = 10. CI earned = 100 * (1.04^2 - 1) = 100 * (1.0816 - 1) = 8.16. Net loss = 10 - 8.16 = 1.84.

AI explanation

Assuming the borrowed sum is Rs. 100, the simple interest paid for 2 years at 5% is (100 * 5 * 2) / 100 = Rs. 10. The compound interest earned at 4% is calculated as 100 * (1.04)^2 - 100 = 108.16 - 100 = Rs. 8.16. The net loss is 10 - 8.16 = Rs. 1.84, which corresponds to a 1.84% loss on the principal sum.

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