Multiple choice

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

  1. $0$%
  2. $5$%
  3. $7.5$%
  4. $10$%
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A Correct answer
Explanation

The man sells for 3600 but receives payment in 2 years. The present value of 3600 at 10% simple interest for 2 years is P = A / (1 + RT/100) = 3600 / (1 + 0.2) = 3600 / 1.2 = 3000. Since the cost price was 3000 and the present value of the sale is 3000, the gain is 0%.

AI explanation

Using the present value formula, 3600 due in 2 years is currently worth 3600 divided by (1 + 0.10 times 2), which equals 3000. Since this equals the purchase price, the gain is 0%. The man has a gain of 0%.

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