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.)
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4615.8 loss
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4615.8 profit
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3615 profit
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4214 loss
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4214 profit
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.