4. Sanjay borrowed 12,800 at the rate of 25/4% per annum at simple interest. On the same day, he lent
it to Rajesh at the same rate but compounded annually. What does Sanjay gain at the end of 2 years?
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Step-by-step explanation:
In 1st case,
Simple Interest = Principle*Rate*Time/100 = 12800*25/4*2/100= 1600
Amount = Principle + SI = 12800+1600 = $14400
In 2nd case,
Amount = P(1+R/100)^n
= 12800(1+25/4/100)²
=12800*(1+25/400)²= 12800*425/400*425/400 = $14450
Gain = 14450-14400 = $50
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