Question

Arun wants to pay Rs.16000 cash for a colour television and Bala wants to purchase the same for Rs.17776, due after 2 years. If the rate of Simple Interest is 5% per annum, which of the deals is better for the shopkeeper?

• A. Neither of the deal
• B. Both are the same
• C. From Arun
• D. From Bala

Answer 1

Answer:

D. From Bala

1. Bala's Future Payment: Rs. 17,776 after 2 years at 5% simple interest.

2. Present Value Calculation: 17776 = P(1 + 0.05 * 2)

3. Solve for P: P = 17776 / 1.1 = 16160

4. Comparison: Bala's present value (Rs. 16,160) > Arun's cash (Rs. 16,000).

Conclusion: Bala's deal is better.