Multiple choice

A person borrows Rs 20000 at the rate of 6 percent per annum on simple interest for 3 years. He immediately lends it to another person at the rate of 8.5 percent per annum on simple interest for 3 years. What is the value of gain per year?

  1. Rs. 1500

  2. Rs. 500

  3. Rs. 800

  4. Rs. 200
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Annual interest paid = 20000 × 6% = Rs 1200. Annual interest received = 20000 × 8.5% = Rs 1700. Gain per year = 1700 - 1200 = Rs 500. The difference in interest rates (8.5% - 6% = 2.5%) applied to the principal gives the annual profit.

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