Question

A man wants to sell his scooter. There are two offers, one at Rs 12,000 cash and the other at a credit or Rs 12,880 to be paid after 8 months, money being at annum. Which is the better offer?

• A. Rs 12,000 in cash
• B. Both are equal
• C. Rs 12,880 at credit
• D. None of these

Answer 1

Answer: (A)

Rs 12,000 in cash

Answer 2

In 1st case the amount is Rs 12000
In 2nd case, let the present value of money be $x$
$\frac{x\times18\times8}{12\times100}+x=12880$
$0.12x+x=12880$
$x=\frac{12880}{1.12}=$ Rs$11500$

$\therefore$ Rs $12000$ in cash is the better offer.
The correct option is (A)