Exams

Creditors and debtors:

During inflation creditors lose because they receive in effect less in goods and services than if they had received the repayments during a period of low prices. Debtors, on other hand, as a group gain during inflation, since they repay their debts in currency that has lost its value.The aggregate volume of internal trade tends to increase during inflation due to higher incomes, greater production and larger spending. But the export trade is likely to suffer on account of arise in the prices of domestic goods.

The same currency unit will now buy less goods and services.But the bondholders lose as they get a fixed interest the real value of which has already fallen.

Let Rs.x be the amount that the elder daughter got at the time of the will. Therefore, the younger daughter got (3,500,000 - x).

The elder daughter’s money earns interest for (21 - 16) = 5 years @ 10% p.a simple interest.

The younger daughter’s money earns interest for (21 - 8.5) = 12.5 years @ 10% p.a simple interest.

As the sum of money that each of the daughters get when they are 21 is the same,

 x+5*10*x100=3,500,000-x+12.5*10*3,500,000-x100

 x+50x=3,500,000-x+125100*3,500,000-125x100

 2x+50x100+125x100=3,500,000*1+54

 200x+50x+125x100=94*3,500,000

 =>x=2,100,000=21 lakhs