Mathematics of FinanceMCQMTP Mar 21Question 1318 of 512
All Questions

A person borrows 5,000\displaystyle 5,000 for 4\displaystyle 4 years at 4%\displaystyle 4\% p.a. simple interest. He immediately lends to another person at 6.25%\displaystyle 6.25\% p.a. for 2\displaystyle 2 years. Find his gain in the transaction per year:

Options

A112.50\displaystyle 112.50
B125\displaystyle 125
C225\displaystyle 225
D162.50\displaystyle 162.50
For any discrepancies in this question, email contact@cadada.in

Correct Answer

Option a112.50\displaystyle 112.50

All Options:

  • A112.50\displaystyle 112.50
  • B125\displaystyle 125
  • C225\displaystyle 225
  • D162.50\displaystyle 162.50

Ad

Detailed Solution & Explanation

**Derivation of Annual Gain** Given: - Borrowed Principal (P\displaystyle P) = Rs. 5,000\displaystyle \text{Rs. }5,000 for 4\displaystyle 4 years at 4%\displaystyle 4\% p.a. simple interest. - Lent Principal (P\displaystyle P) = Rs. 5,000\displaystyle \text{Rs. }5,000 for 2\displaystyle 2 years at 6.25%\displaystyle 6.25\% p.a. simple interest. **Step 1: Calculate borrowing cost per year** Interest paid per year=P×rborrow×1100=5000×4×1100=Rs. 200\text{Interest paid per year} = \frac{P \times r_{borrow} \times 1}{100} = \frac{5000 \times 4 \times 1}{100} = \text{Rs. }200 **Step 2: Calculate lending income per year** Interest received per year=P×rlend×1100=5000×6.25×1100=Rs. 312.50\text{Interest received per year} = \frac{P \times r_{lend} \times 1}{100} = \frac{5000 \times 6.25 \times 1}{100} = \text{Rs. }312.50 **Step 3: Calculate net annual gain in the transaction** 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 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