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I am bit confused about following question asked in previous year exam which is as follows :

Rakesh purchased a horse for Rs. 3000 and sold it the same day for Rs. 3600, allowing the buyer a credit of 2 years. If the prevailing rate of interest be 10% per annum, then Rakesh has a net gain of:

A. 0%

B. 5%

C. 7.5%

D. 10%

The answer given is 0% and I don't understand how. I am also confused about the terminology used like 'credit of 2 years' and 'prevailing rate of interest'.

Any help will be useful.

Thanks.

ogirkar
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    I agree it is phrased poorly. The way I'd read it: "the sale price is $3600$ but payment will not be made for $2$ years. Thus Rakesh has extended a $2$ year loan for $3600$. Assuming that the interest on that loan is $10%$ annual, what is the present value of that $3600$?" – lulu Apr 09 '22 at 11:41
  • present value will be 3000 i agree, but he sold it for 3600, so he had some profit.. then why answer is 0%? – ogirkar Apr 10 '22 at 18:32
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    If you trade an asset with a present value of $3000$ for another asset with a present value of $3000$ your gain is $0$. – lulu Apr 10 '22 at 18:33

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