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Ram purchased a flat at Rs. 1 lakh and Prem purchased a plot of land worth Rs. 1.1 lakh. The respective annual rates at which the prices of the flat and the plot increased were 10% and 5%. After two years they exchanged their belongings and one paid the other the difference. Then:

  1. Ram paid Rs. 275 to Prem
  2. Ram paid Rs. 475 to Prem
  3. Ram paid Rs. 2750 to Prem
  4. Prem paid Rs. 475 to Ram
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After 2 years the price of the flat will be

  1,00,000 * (1 + 10/100)2 = 1,00,000 * (11/10)2 = 1,21,000              [Calculated in compound interest]

After 2 years the price of the plot of land will be

   1,10,000 * (1 + 5/100)2 = 1,10,000 * (105/100)2 = 121275            [Calculated in compound interest]

So, the plot has higher price than the flat.

Therefore, Ram will pay (121275 - 121000) = 275 rs. to Prem

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