IIFT 2019 Question Paper | Quants

CAT Questions

The best way to boost your IIFT prep is to practice the actual IIFT Question Papers. 2IIM offers you exactly that, in a student friendly format to take value from this. In the 2019 IIFT, quants were a mixed bag of questions of varying difficulty, with some routine questions and the others were very demanding. Some beautiful questions that laid emphasis on Learning ideas from basics and being able to comprehend more than remembering gazillion formulae and shortcuts.

Question 25: Ms. Debjani after her MBA graduation wants to have start-up of her own. For this, she uses Rs 8,00,000 of her own savings and borrows Rs 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 Rs 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.

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Video Explanation

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Explanatory Answer

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.
The interest in the first year = 1200000 × 0.08
If she repays the principal of the loan in 25 years, it means she pays = Rs 48000 at the end of every year.
So, the interest for the second year is calculated only on the remaining sum
12,00,000 – 48,000 = Rs 11,52,000 for the second year
And so the interest = 11,52,000 × 0.08
We can find the interest for each year till the twenty-fifth year, and the interest of the twenty-fifth year is
= 48,000 * 0.08
This is in AP with first term 48,000 * 0.08 with common difference 3840
Total interest = \\frac{25}{2}) × (2 ×48000 × 0.08 + 24 × 3840)\)
=1248000

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The question is "How much total interest she has to pay on her initial borrowing? Assume simple interest rate at 8 per cent per annum."

Hence, the answer is, "12,48,000 Rs"