A man borrowed $Rs.\,1000$ to build a house. He pays $5\%\,p.a$ simple interest. He lets the house and receives a rent of $Rs.\,12.50$ per month. In how many years he is expected to clear the debt?
-
$\;7$
-
$\;15$
-
$\;10$
-
$\;8$
C
Correct answer
Explanation
Annual rent = 12.50 * 12 = 150. Interest per year = 1000 * 0.05 = 50. The man uses the rent to pay interest and reduce principal. However, the question implies clearing the debt. If he pays 50 interest annually, he has 100 left to pay principal. 1000 / 100 = 10 years.