Mathematics of FinanceMCQPYQ May 18Question 1176 of 512
All Questions

A person borrows Rs. 5,000\displaystyle \text{Rs. }5,000 for 2\displaystyle 2 years at 4%\displaystyle 4\% per annual simple interest. He immediately lends to another person at 6.25%\displaystyle 6.25\% per annum for 2\displaystyle 2 years find his gain in the transaction for year:

Options

ARs. 112.50\displaystyle \text{Rs. }112.50
BRs. 125\displaystyle \text{Rs. }125
CRs. 107.50\displaystyle \text{Rs. }107.50
DRs. 102.50\displaystyle \text{Rs. }102.50
For any discrepancies in this question, email contact@cadada.in

Correct Answer

Option aRs. 112.50\displaystyle \text{Rs. }112.50

All Options:

  • ARs. 112.50\displaystyle \text{Rs. }112.50
  • BRs. 125\displaystyle \text{Rs. }125
  • CRs. 107.50\displaystyle \text{Rs. }107.50
  • DRs. 102.50\displaystyle \text{Rs. }102.50

Ad

Detailed Solution & Explanation

**Derivation of Gain per Year** Given: - Principal amount (P\displaystyle P) = Rs. 5,000\displaystyle \text{Rs. }5,000 - Borrowing rate of interest (r1\displaystyle r_1) = 4%\displaystyle 4\% per annum - Lending rate of interest (r2\displaystyle r_2) = 6.25%\displaystyle 6.25\% per annum - Time (t\displaystyle t) = 2\displaystyle 2 years **Step 1: Calculate interest paid on borrowing per year** Interest Paid per year=P×r1×1100=5000×4×1100=Rs. 200\text{Interest Paid per year} = \frac{P \times r_1 \times 1}{100} = \frac{5000 \times 4 \times 1}{100} = \text{Rs. }200 **Step 2: Calculate interest received from lending per year** Interest Received per year=P×r2×1100=5000×6.25×1100=Rs. 312.50\text{Interest Received per year} = \frac{P \times r_2 \times 1}{100} = \frac{5000 \times 6.25 \times 1}{100} = \text{Rs. }312.50 **Step 3: Calculate gain per year** Gain per year=Interest Received per yearInterest Paid per year\text{Gain per year} = \text{Interest Received per year} - \text{Interest Paid per year} Gain per year=312.50200=Rs. 112.50\text{Gain per year} = 312.50 - 200 = \text{Rs. }112.50 Alternatively, the gain rate per year is: Gain Rate=r2r1=6.25%4%=2.25% per annum\text{Gain Rate} = r_2 - r_1 = 6.25\% - 4\% = 2.25\% \text{ per annum} Gain per year=5000×2.25×1100=Rs. 112.50\text{Gain per year} = \frac{5000 \times 2.25 \times 1}{100} = \text{Rs. }112.50 Hence, **Option A** is the correct answer.

About This Chapter: Mathematics of Finance

Paper

Paper 3: Quantitative Aptitude

Weightage

12-16 Marks

Key Topics

Simple & Compound Interest, Annuity, Perpetuity

The most important mathematical chapter in the entire syllabus. It covers Simple Interest (SI), Compound Interest (CI), Nominal vs Effective rates, Present and Future Value, Annuities (Ordinary and Due), Sinking Funds, and Perpetuities. The concepts learned here are applied heavily in CA Intermediate and Final.

View Official ICAI Syllabus

Exam Strategy Tip

Guaranteed 12-16 marks. Master your calculator! Learn the 'GT' and compound interest M+/M- tricks to solve annuity questions in 10 seconds without writing long formulas.

Related Comparison Tables

More Questions from Mathematics of Finance

Ready to Master Mathematics of Finance?

Practice all 512 questions with instant feedback, earn XP, track your streaks, and ace your CA Foundation exam.

Start Practicing — It's Free