A money lender borrows money at 4% P.a and pays interest at the end of the year. He lends it at 6% P.a compound interest compounded half-yearly and receives the interest at the end of the year. Thus be gains Rs 104.50 a year. The amount of money he borrows is_________?

Compound Interest 15/07/2021

A. Rs 4500
B. Rs 5000
C. Rs 5500
D. Rs 6000

Explanation:

Let the money borrowed be Rs x

Interest paid by the money lender = Rs (x × 4/100 × 1) =Rs x/25

Interest received by the money lender

= Rs [x × (1 + 3/100)2 – x]
= Rs(x × 103/100 × 103/100 – x)
Gain = Rs (609x/1000 – x /25)
= Rs 209x/1000 = Rs 609x/10000
Therefore 209x/10000 = 104.50
=> 209x = 1045000
=> x = 5000

Hence money borrowed = Rs 5000

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