Question 25

Ms. Debjani after her MBA graduation wants to have start-up of her own. For this, she uses ₹ 8,00,000 of her own savings and borrows ₹ 12,00,000 from a public sector bank under MUDRA Scheme.As per the agreement with the bank,she is supposed to repay the principle of this loan equally over the period of the loan which is 25 years. Two years after taking the first loan, she borrowed an additional loan of ₹ 8,00,000 to finance expansion plan of her start-up. If Ms Debjani clears all her loans in 25 years from the date of taking the first loan, how much total interest she has to pay on her initial borrowing? Assume simple interest rate at 8 per cent per annum.

Solution

For the first year, interest= 1200000*0.08

It has been given that she repays the principal of the loan in 25 years i.e she pays $$\frac{1200000}{25}$$ = Rs 48000 at the end of every year.

Therefore the interest for the second year is calculated only on the remaining sum i.e 1200000-48000 = Rs 1152000

for the second year, interest = 1152000*0.08

On similar lines for the twenty-fifth year = 48000*0.08

This is in AP with first term 48000*0.08 with common difference 3840

Total interest = $$\ \frac{\ 25}{2}\left(2\times\ 48000\cdot0.08+24\cdot3840\right)$$

=1248000

A is the correct answer.

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