Question
David takes a loan of Rs. 20000
from his friend Alex, which he is to return at 10% p.a. simple interest after 5 years. Alex takes a loan from George, which he returns after 2 years at 10% p.a. compound interest. If Alex returns Rs. 24200 to George, then what is the difference between the amount borrowed by Alex from George and the amount returned by David to Alex?Solution
Amount David Returns to Alex: Principal: 20000, Rate: 10%, Time: 5 years. Simple Interest = (20000Ć10Ć5)/100 = 10000. Total Amount = 20000+10000=30000.
Amount Alex Borrowed from George: Returned 24200, Rate: 10%, Time: 2 years. Using Compound Interest formula: 
Difference: Amount returned by David: 30000. Amount borrowed by Alex: 20000 Difference = 30000 ā 20000=10,000.
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