Pratyush Priyam Kuan
asked
in Quantitative Aptitude
Apr 5, 2020

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Sourabh borrows rs 25,00,000 at 12% compound interest from a bank and invests in shares. The investment gives him a return of 20% per annum and he repays rs 5,00,000 at the end of first year. How much does he make for himself after paying all the outstanding amount at the end of the second year?

a 424000 b 356241.50

c 525000 d 484241.80

a 424000 b 356241.50

c 525000 d 484241.80

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Best answer

Let’s divide the problem in terms of cash inflows and outflows. Profit earned=Inflows-Outflows

Initial Inflow=25,00,000

**After 1 ^{st} year:-**

- Inflow=20%of25,00,000=5,00,000
- Outflow=5,00,000(As he paid off this amount of loan at the end of 1
^{st}year) - Net gain=Inflow-Outflow=0
- Loan amount at the end of 1
^{st}year= 25,00,000(1.12)=28,00,000 - Amount after repayment of 5,00,000=23,00,000

As CI is calculated annually, the new amount will be calculated on the outstanding amount after the end of 1^{st} year.

Amount to be paid off at the end of 2^{nd} year=23,00,000(1.12)=2576000

**After 2 ^{nd} year:**-

- Inflow=20% of 25,00,000-5,00,000
- Outflow=2576000

Overall gain=Initial Inflow+Inflow in 2 yrs – outflow at the end of 2^{nd} year= 25,00,000+5,00,000-2576000= 424000