Mathematics for FinanceMTP Mar 21Question 1318 of 512
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A person borrows 5,000\displaystyle 5,000 for 4\displaystyle 4 years at 4%\displaystyle 4\% p.a. simple interest. He immediately lends to another person at 6.25%\displaystyle 6.25\% p.a. for 2\displaystyle 2 years. Find his gain in the transaction per year:

Options

A112.50\displaystyle 112.50
B125\displaystyle 125
C225\displaystyle 225
D162.50\displaystyle 162.50
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Correct Answer

✅ Option a — 112.50\displaystyle 112.50

All Options:

  • A112.50\displaystyle 112.50
  • B125\displaystyle 125
  • C225\displaystyle 225
  • D162.50\displaystyle 162.50

Detailed Solution & Explanation

**Derivation of Annual Gain** Given: - Borrowed Principal (P\displaystyle P) = Rs. 5,000\displaystyle \text{Rs. }5,000 for 4\displaystyle 4 years at 4%\displaystyle 4\% p.a. simple interest. - Lent Principal (P\displaystyle P) = Rs. 5,000\displaystyle \text{Rs. }5,000 for 2\displaystyle 2 years at 6.25%\displaystyle 6.25\% p.a. simple interest. **Step 1: Calculate borrowing cost per year** Interest paid per year=P×rborrow×1100=5000×4×1100=Rs. 200\text{Interest paid per year} = \frac{P \times r_{borrow} \times 1}{100} = \frac{5000 \times 4 \times 1}{100} = \text{Rs. }200 **Step 2: Calculate lending income per year** Interest received per year=P×rlend×1100=5000×6.25×1100=Rs. 312.50\text{Interest received per year} = \frac{P \times r_{lend} \times 1}{100} = \frac{5000 \times 6.25 \times 1}{100} = \text{Rs. }312.50 **Step 3: Calculate net annual gain in the transaction** Gain per year=Interest received per year−Interest paid per year\text{Gain per year} = \text{Interest received per year} - \text{Interest paid per year} Gain per year=312.50−200=Rs. 112.50\text{Gain per year} = 312.50 - 200 = \text{Rs. }112.50 Hence, **Option A** is the correct answer.

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