Question

Purnima took a loan of RS.100,000 from bank at the rate of 10 % compound interest . Immediately she lent the whole amount to her friend at the rate of 10 % compound half yearly . How much profit will she make at the end of 2 years .

Answer 1

RS 44,000

Explanation:

The compound interest formula is FV = PV(1 + r)ⁿ. Where FV = Future value, PV = present value, r = rate and n = no of years.

Since Purnima loans RS 100,000, PV = 100,000. Which is the amount she lends to her friend. She lends to her friend at a rate of 10% compound half yearly which equals r = 10% ÷ 1/2 year = 20% per year = 0.2. Since she lends her friend for two years, n = 2.

So, FV = PV(1 + r)ⁿ = 100,000(1 + 0.2)² = 100,000(1.2)² = 144,000

So, her profit is FV - PV = 144,000 - 100,000 = RS 44,000