A person borrows Rs. 5000 for 2 years at 4% p.a. simple interest. He immediately lends it to another person at 6¼% p.a for 2 years. Find his gain in the transaction per year.

Given

• Borrows Rs. 5000 @ 4% p.a. for 2 yrs ⇒ Pays SI_out
• Lends same Rs. 5000 @ 6¼% p.a. for 2 yrs ⇒ Receives SI_in

Step 1: Compute both interests
SI_out = 5000 × 4 × 2 ÷ 100 = Rs. 400SI_in = 5000 × 6.25 × 2 ÷ 100 = Rs. 625

Step 2: Net gain
Net (2 years) = 625 − 400 = Rs. 225Per year gain = 225 ÷ 2 = Rs. 112.50

Final Answer: Net gain per year = Rs. 112.50.