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A trader owes a merchant Rs. 10,028 due 1 year hence. The trader wants to settle the account after 3 months. If the rate of interest 12% per annum, how much cash should he pay?

Correct answer: B. Rs. 9200

  • A. Rs. 9025.20
  • B. Rs. 9200
  • C. Rs. 9600
  • D. Rs. 9560

Explanation

The debt of Rs. 10,028 is due after 12 months, while payment is made after 3 months, leaving 9 months of interest. The cash payment must satisfy cash amount x (1 + 12% x 9/12) = Rs. 10,028, so cash amount = Rs. 10,028/1.09 = Rs. 9200. The likely trap is Rs. 9600, which applies an incorrect discount or ignores the exact 9-month remaining period.

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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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