Multiple choice

Raj borrows Rs. 80,000 from his colleague for 3 years at a simple interest rate of 5% per annum. He then lends the same amount to another colleague at an interest rate of 7% per annum for the same duration. What is Raj's annual profit from this transaction?

  1. Rs. 800

  2. Rs. 1,600

  3. Rs. 3,200

  4. Rs. 4,800

  5. Rs. 5,600
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Raj borrows at 5% and lends at 7%. The spread is 2% per year on 80,000. 0.02 * 80,000 = 1,600.

AI explanation

Raj's annual profit is the difference between the interest earned and the interest paid, calculated using the simple interest formula. The annual interest he pays is (80000 * 5 * 1) / 100 = Rs. 4,000, and the annual interest he earns is (80000 * 7 * 1) / 100 = Rs. 5,600. The difference between these two amounts is 5600 - 4000, resulting in an annual profit of Rs. 1,600.

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