Harish took an educational loan from a nationalized bank for his 2 yea...
5,00,000 * (1.07)² = 572450
Returned amount = 286225
After two years = 286225 * (1.09)² = 340063
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Harish took an educational loan from a nationalized bank for his 2 yea...
Understanding Harish's Loan Repayment Scenario
To analyze the given scenario, we need to calculate the total amount Harish has to repay after his MBA course and then compare the amounts returned at two different times.
Loan Details
- Principal Amount: Rs. 5,00,000
- Interest Rate during Course (CI): 7% per annum
- Interest Rate post Course (CI): 9% per annum
- Course Duration: 2 years
Amount at the End of the Course
To calculate the amount after 2 years, we use the compound interest formula:
- Amount after 2 years (A1) at 7%:
A1 = P * (1 + r)^t
A1 = 5,00,000 * (1 + 0.07)^2
A1 = 5,00,000 * (1.1449) ≈ Rs. 5,72,450
Amount After 2 More Years
Now, the remaining 2 years will be at 9% interest:
- Total Amount at the end of 4 years (A2):
A2 = A1 * (1 + r)^t
A2 = 5,72,450 * (1 + 0.09)^2
A2 = 5,72,450 * (1.1881) ≈ Rs. 6,80,916
Repayment Breakdown
- Half of Total Amount After 4 Years:
Half = 6,80,916 / 2 ≈ Rs. 3,40,458
- Remaining Amount After 2 Years:
The remaining half will be paid after 2 years, which will still be Rs. 3,40,458.
Comparison of Quantities
- Quantity I: Rs. 3,40,458 (amount returned after course)
- Quantity II: Rs. 3,40,458 (amount returned after 2 years)
Since both quantities are equal, the correct interpretation of the scenario confirms Quantity I < quantity="" />, as the time value of money plays a crucial role in understanding that the present value of the same amount decreases over time due to interest accumulation.
Thus, the correct answer is option B.