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The question is from CAT Simple and compound interest. 2IIMs CAT question bank provides you with CAT questions that can help you gear for CAT Exam CAT 2023. Simple Interest and Compound Interest is an important topic for CAT Preparation. This question is about a mischievous money lender, who takes advantage of difficult situation of poor people and gives bribe to escape.

Question 24: A moneylender takes advantage of difficult situation of poor people and charges 50% interest. However he never gets caught because he gives 20% of his total capital (initial capital + profit) as bribe. If in the beginning of 4th year, he has a capital of Rs 25,000 to invest, how much bribe did he give at the end of the second year?

  1. Rs 4,900
  2. Rs 5,200
  3. Rs 5,000
  4. Rs 6,000

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Explanatory Answer

Method of solving this CAT Question from Simple and Compound interest: Subtract the interest by bribe for each year.

Let the moneylender has Rs 100 initially.
1st year ---> 100 + 50 (interest) ---> 150 – 20% bribe ---> 120
2nd year ---> 120 + 60 (interest) ---> 180 – 20% bribe ---> 144
3rd year ---> 144 + 72 (interest) ---> 216 – 20% bribe ---> 172.8 (This is the capital he will have at the beginning of 4th year)
So, if 172.8 --> 25,000
=> 36 (bribe given in 2nd year) = (25000/172.8) ∗ 36 which on simplifying becomes 25000/4.8. Thus greater than 5000 but less than 6000.So,
Note – Never go for solving the entire calculation in such type of questions. Most of them can be managed using the options. Saves a lot of precious time

The question is "If in the beginning of 4th year, he has a capital of Rs 25,000 to invest, how much bribe did he give at the end of the second year?"
He gave Rs.5200 as bribe at the end of the second year.

Hence, the answer is Rs.5200.

Choice B is the correct answer.


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