Rohit borrows ₹ 62,500 from Arun for 2 years at 10% per annum, simple interest. He immediately lends out this sum to Kunal at 10% per annum for the same period, compounded annually. Calculate Rohit's profit in the transaction at the end of two years.

For Rohit,

P = ₹ 62,500

T = 2 year

R = 10% per annum simple interest

Interest Rohit pays to Arun:

I = $\dfrac{P \times R \times T}{100}$

$= \dfrac{62500 \times 10 \times 2}{100}$ = ₹ 12,500.

For Kunal,

For first year :

P = ₹ 62,500

T = 1 year

R = 10% per annum compounded annually

I = $\dfrac{P \times R \times T}{100}$

$= \dfrac{62500 \times 10 \times 1}{100}$ = ₹ 6,250.

Amount = P + I = ₹ 62,500 + ₹ 6,250 = ₹ 68,750.

For second year :

P = ₹ 68,750

T = 1 year

R = 10% per annum compounded annually

I = $\dfrac{P \times R \times T}{100}$

$= \dfrac{68750 \times 10 \times 1}{100}$ = ₹ 6,875.

Amount = P + I = ₹ 68,750 + ₹ 6,875 = ₹ 75,625.

Compound interest = Final amount - Initial principal

= ₹ 75,625 - ₹ 62,500 = ₹ 13,125.

∴ Interest Kunal pays to Rohit = ₹ 13,125

Rohit's profit = Compound interest received from Kunal - Simple interest paid to Arun = ₹ 13,125 - ₹ 12,500 = ₹ 625.

Hence, Rohit's profit in the transaction at the end of two years = ₹ 625.