A man borrowed Rs. 8000 from his friend at the rate of 12% per annum for 3 years at simple interest. He immediately lend the whole to his another friend at the rate of 10% per annum compound interest for 3 years. He returned the amount to his friend he borrowed the money with the interest after 3 years, what is the profit/loss made by the man in the whole transaction?

Option 2 : Rs. 232 loss

Amount received by the man after lending the money to his friend

When calculate at compound interest

Amount (A) = p(1 + r/100)ⁿ

Where p, r and n respectively are principal, rate of interest and time

⇒ A = 8000 (1 + 10/100)³ = 10648

Amount given by the man to his friend he took the money

When calculated at simple interest

Interest = (p × r × t) /100

Where p, r and t respectively are principal, rate of interest and time

⇒ Interest = (8000 × 12 × 3) /100 = 2880

⇒ Amount = 8000 + 2880 = Rs. 10880

⇒ Extra money added by the man = 10880 – 10648 = Rs. 232