Question

Ram borrowed a sum of Rs 25,000 at 12% p.a. simple interest for 1 year 6 months and lent to another person at the same rate of compound interest compounded half-yearly for the same interval of time. How much profit did she make?

a) Rs 1,875
b) Rs 1,925
c) Rs 1,950
d) Rs 2,000

Answer 1

The profit Ram made on the difference between simple and compound interest is calculated to be Rs 275.40. However, this does not match any of the provided answer choices, suggesting there might be an error in the options or the calculations.

Step-by-step explanation:

To calculate the profit Ram made from the difference in simple and compound interest, we need to find the amount of interest earned through both methods for the given conditions.

Firstly, we calculate the simple interest that Ram pays:

1. Simple Interest (SI) = Principal × Rate × Time.
2. SI = Rs 25,000 × 12% × 1.5 years.
3. SI = Rs 25,000 × 0.12 × 1.5.
4. SI = Rs 4,500.

Secondly, we calculate the compound interest that Ram earns:

1. Compound Interest (CI) = Principal × (1 + Rate/n)^(n×Time) - Principal.
2. CI = Rs 25,000 × (1 + 0.12/2)^(2×1.5) - Rs 25,000.
3. CI = Rs 25,000 × (1 + 0.06)^3 - Rs 25,000.
4. CI = Rs 25,000 × 1.191016 - Rs 25,000.
5. CI = Rs 29,775.40 - Rs 25,000.
6. CI = Rs 4,775.40.

Now, we can find the profit by subtracting the simple interest paid from the compound interest earned:

1. Profit = CI - SI.
2. Profit = Rs 4,775.40 - Rs 4,500.
3. Profit = Rs 275.40.

However, none of the provided options (a) Rs 1,875 (b) Rs 1,925 (c) Rs 1,950 (d) Rs 2,000 matches the calculated profit of Rs 275.40. There may be an issue with the options given or the calculations provided in the question.