A person borrows Rs.5000 for 2 years at 4% per annum Simple Interest. He immediately lends it to another person at 6.25% per annum for 2 years. Find his gain in the transaction per year.

$$ SI = \frac{PNR}{100} $$

person borrows Rs.5000 for 2 years at 4% per annum Simple Interest.

$$ SI1 = \frac{ 5000 \times 2 \times 4}{100} = 400 $$

He  lends it to another person at 6.25% per annum for 2 years.

$$ SI2 = \frac{ 5000 \times 25 \times 2}{4 \times 100} = 625 $$

gain in 2 years = SI2 - SI1

                         = 625 - 400 

                         = 225

gain in 1 year = $$ \frac{225}{2} = 112.50 $$