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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:

Correct answer: A. 0%

  • A. 0%
  • B. 5%
  • C. 7.5%
  • D. 10%

Explanation

The present value of the Rs. 3600 received after 2 years is Rs. 3600/(1 + 10% x 2) = Rs. 3600/1.20 = Rs. 3000. This equals the purchase price, so the gain is Rs. 0, or 0%. The likely trap is 10%, which results from treating the interest rate as the profit percentage instead of reducing the delayed sale price to its cash value.

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About Profit and Loss

Profit and loss compare the cost price and selling price of an item, using profit or loss percentages based on the cost price unless stated otherwise. Questions include marked price, discount, successive discounts, commission, and finding an unknown price, with care needed to distinguish discount from loss.

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