Multiple choice

Rahul take a loan of 75000 at a compound interest on 14% rate of interest per annum and lend it to his friend Rahman who returns this amount in three years with simple interest at the rate of 14% per annum. Find the loss or gain of Rahul in the whole transaction. (in rs.)

  1. 4615.8 loss

  2. 4615.8 profit

  3. 3615 profit

  4. 4214 loss

  5. 4214 profit

Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Rahul pays compound interest: 75000 × (1.14)³ - 75000 = 75000 × 1.481544 - 75000 = 36115.80 interest + principal = 111115.80. He lends at simple interest: 75000 × 14% × 3 = 31500 interest. Received: 75000 + 31500 = 106500. Loss: 111115.80 - 106500 = 4615.80. Compound interest costs more than simple interest over multiple years - Rahul pays 36115.80 but only receives 31500, losing 4615.80. Option A is correct.