Question

Govind borrows 18,000 at 10% simple
interest. He immediately invests the money
borrowed at 10% compound interest
compounded half-yearly. How much money
does Govind gain in one year ?
​

Answer 1

Step-by-step explanation:

The simple interest formula is

A = P(1+rt)

Compute compound interest formula: A = P*(1 + r/n)^nt.

now p= 18000 (amount)

r=10%(rate of interest)

t=1 (time/ year)

n= 2 (how many time interest paid in one year. for half yearly-2, quaterly-4, monthly-12)

interst have to pay to borrower at simple interest rate

I.e 18000(1+rt)

=18000(1+10%*1)

=18000(1+.1*1)

=18000(1+.1)

=18000*1.1= 19800

interest will earn by investing in compound rate

I.e 18000 *(1+10%/2)^(2*1)

=18000*(1+.1/2)^2

=18000*(1+.05)^2

=18000*1.05^2

=18000*1.1025

=19845

19845-19800=45 gain