Question

A watch is bought for ₹ 1950 in cash and sold for ₹ 2200 on one-year credit. If the interest rate is $10\%$ p.a., find the trader's gain/loss.

• A. Gains ₹ 5
• B. Gains ₹ 50
• C. Loses ₹ 30
• D. Gains ₹ 30

Hint:

When terms involve credit, discount the future amount to present value using the given interest rate before comparing with cash cost.

Answer 1

The Correct Option is B

Step 1: Convert credit price to cash equivalent.
Present value of ₹ 2200 due in $1$ year at $10\%$ p.a.:
$\text{PV}=\dfrac{2200}{1+0.10}=₹ 2000$. 

Step 2: Compare with cost.
Effective SP (cash equivalent) $=₹ 2000$, Cost $=₹ 1950$.
Gain $=₹(2000-1950)=₹ 50$.
$\Rightarrow\ \boxed{\text{Gains ₹ 50}}.$