# Discussion

Explanation:

Let the amount borrowed from each source be Rs. P for n months.

Since Swarn pays Rs. 62,100 to each firm, it pays the same simple interest to each firm.

Since it repays the bank 6 months before repayment, its effective loan tenure is (n − 6) months; while for the loan with the microfinance firm, its tenure is n months.

Considering same interest: [P × 10 × (n − 6)]/(12 × 100) = [P × 8 × n]/(12 × 100)

∴ 5(n − 6) = 4n i.e. n = 30

Hence, time period of borrowing = 30 months = 2.5 years. Hence, options 1 and 2 are eliminated.

Considering the loan with the microfinance firm:

62100 − P = (P × 8 × 2.5)/100

∴ 62100 = 1.2P i.e. P = Rs. 51,750

Hence, option (c).

Alternatively,

Consider the loan with the microfinance firm. Let the amount borrowed be Rs. P for n years.

∴ 62100 − P = (P × 8 × n)/100

∴ 62100 = P(1 + 0.08n)

Now, observe that there are only two values of n (2 and 2.5) in the options). Substitute each value in the above equation and check if the Principal value given in that option is obtained.

When n = 2; P = 62100/1.16 = Rs. 53,535 (approximately). SInce this value is not in the options, this case is invalid.

When n = 2.5; P = 62100/1.2 = Rs. 51,750

Hence, option (c).

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