A person borrowef Rs 16000 from a bank at 12.5% pet annum simple intrest and lent the whole amount to shopkeeper at the sam rate of compound interest. How much will he gain in 2 years?

The amount he gains in 2 years is Rs. 250

Step-by-step explanation:

The parameters of the amount borrowed from the bank are;

The amount borrowed, P = Rs. 16,000

The interest rate of the amount borrowed, R = 12.5%

The number of years, T = 2 years

The simple interest, I = (P × R × T)/100 =  (Rs. 16,000 × 12.5 × 2)/100 = Rs. 4,000

The total amount the person is to pay bank to the bank = P + I = Rs. 16,000 + Rs. 4,000 = Rs. 20,000

The parameters of the amount lent to the shopkeeper are;

The amount lent, P = Rs. 16,000

The compound interest rate of the amount lent, R = 12.5%

The number of years, T = 2 years

The amount he receives from the shopkeeper after 2 years, A = P·(1 + R/n)^(n × T) = Rs. 16,000 × (1 + 0.125/1)^(1 × 2) = Rs. 20,250

The amount he gains in 2 years = The amount he receives from the shop keeper - The amount he gives to the bank = Rs. 20,250 - Rs. 20,000 = Rs. 250

The amount he gains in 2 years = Rs. 250.

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