We have been given that in one year, a bank pays 2% interest on a $1,000 deposit. The same year, the bank charges 12% interest on a $1,000 loan. We are asked to find the profit of bank at the end of one year.
Let us find amount paid by bank on deposit of $1,000 in one year by finding 2% of $1,000.
[tex]\text{Amount paid by bank}=\$1,000\times \frac{2}{100}[/tex]
[tex]\text{Amount paid by bank}=\$10\times 2[/tex]
[tex]\text{Amount paid by bank}=\$20[/tex]
Now we will find the amount earned by bank on a loan amount of $1,000 in one year by calculating 12% of $1,000.
[tex]\text{Amount earned by bank}=\$1,000\times \frac{12}{100}[/tex]
[tex]\text{Amount earned by bank}=\$10\times 12[/tex]
[tex]\text{Amount earned by bank}=\$120[/tex]
The profit made by bank would be amount earned minus amount paid.
[tex]\text{Profit made by bank}=\$120-\$20[/tex]
[tex]\text{Profit made by bank}=\$100[/tex]
Therefore, the bank will make a profit of [tex]\$100[/tex] at the end of the year and option A is the correct choice.
