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Bunuel
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A moneylender lent $2000 to Ricky with the condition that Ricky will p 15 Oct 2021, 01:30
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70% (02:28) correct 30% (02:33) wrong based on 293 sessions

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A moneylender lent $2000 to Ricky with the condition that Ricky will pay back 5 percent of this amount every half year. Till Ricky repaid the original loan amount (principal) completely, the moneylender charged an interest equal to 5 percent per quarter on the original loan amount. Ricky always made interest payments and principal repayments on time. (For example, at the end of the first quarter, Ricky paid the moneylender 5 percent of $2000 as interest and at the end of 6 months, Ricky paid the money lender 5 percent of $2000 as interest and 5 percent of $2000 as principal repayment). What was the total amount in dollars that Ricky paid to the moneylender?

(A) $4000
(B) $6000
(C) $7200
(D) $8000
(E) $11200
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B
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A moneylender lent $2000 to Ricky with the condition that Ricky will p 26 Oct 2021, 04:52
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Bunuel
A moneylender lent $2000 to Ricky with the condition that Ricky will pay back 5 percent of this amount every half year. Till Ricky repaid the original loan amount (principal) completely, the moneylender charged an interest equal to 5 percent per quarter on the original loan amount. Ricky always made interest payments and principal repayments on time. (For example, at the end of the first quarter, Ricky paid the moneylender 5 percent of $2000 as interest and at the end of 6 months, Ricky paid the money lender 5 percent of $2000 as interest and 5 percent of $2000 as principal repayment). What was the total amount in dollars that Ricky paid to the moneylender?

(A) $4000
(B) $6000
(C) $7200
(D) $8000
(E) $11200
 
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So every half year principal \(\frac{5}{100}* 2000 = 100\)

Hence every year principal \(100 *2 = 200 \)

So to pay the entire amt. it would take \(\frac{2000}{200}= 10 \) yrs.

Lets calculate the interest he has to pay for those \(10\) yrs.

Per quarter interest is \(\frac{5}{100}* 2000 = 100\)

Hence yearly interest is \(100 *4 = 400\)

In \(10\) years total interest \(400 *10= 4000\)

Total amt. in \(10 \) yrs = principal + interest

\(2000 +4000 =6000\)

Ans=B

Hope it's clear.

Bunuel there is a typo in the question above, the highlighted portion has been repeated causing confusion.­
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A moneylender lent $2000 to Ricky with the condition that Ricky will p 16 Jul 2026, 04:58
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this is a bit confusing; after paying back first portion of his principal, will the interest be on the remaining amount or the original amount?
Bunuel
A moneylender lent $2000 to Ricky with the condition that Ricky will pay back 5 percent of this amount every half year. Till Ricky repaid the original loan amount (principal) completely, the moneylender charged an interest equal to 5 percent per quarter on the original loan amount. Ricky always made interest payments and principal repayments on time. (For example, at the end of the first quarter, Ricky paid the moneylender 5 percent of $2000 as interest and at the end of 6 months, Ricky paid the money lender 5 percent of $2000 as interest and 5 percent of $2000 as principal repayment). What was the total amount in dollars that Ricky paid to the moneylender?

(A) $4000
(B) $6000
(C) $7200
(D) $8000
(E) $11200
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Bunuel
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A moneylender lent $2000 to Ricky with the condition that Ricky will p 16 Jul 2026, 07:26
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SwethaReddyL
this is a bit confusing; after paying back first portion of his principal, will the interest be on the remaining amount or the original amount?

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The interest is always calculated on the original $2,000, not on the remaining principal. The question explicitly says “5 percent per quarter on the original loan amount.”

Therefore, Ricky pays $100 in interest every quarter until the principal is fully repaid.
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A moneylender lent $2000 to Ricky with the condition that Ricky will p 16 Jul 2026, 23:32
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Hi SwethaReddyL,

Great question, and it's exactly the spot where real-life loan intuition fights the wording of this problem.

In a normal loan, you'd be right: after paying back part of the principal, interest would drop because it's charged on what's still owed. But this question deliberately overrides that. Look at the exact words:

"the moneylender charged an interest equal to 5 percent per quarter on the original loan amount."

The phrase "on the original loan amount" is the whole key. The interest is always 5% of $2000 = $100 per quarter, and it keeps being charged that way until the principal is completely gone - no matter how much principal Ricky has already paid back.

So in stne's solution, the interest never shrinks. That's why:

- Principal repaid per half-year = $100, so paying off $2000 takes 20 half-years = 40 quarters.
- Interest = $100 every quarter for all 40 quarters = $4000.
- Total = principal $2000 + interest $4000 = $6000 - answer B.

If the interest had been on the remaining balance, the total would be smaller - but the question locks it to the original $2000, so it stays a flat $100 each quarter.

Quick way to feel the difference: imagine a $100 loan where you repay $10 principal each period and interest is "5% per period on the original amount." Interest is $5 every period the whole time - it does not drop to 5% of $90, then 5% of $80, and so on. Whenever a problem says "on the original amount," treat that base as frozen.

Answer: B

SwethaReddyL
this is a bit confusing; after paying back first portion of his principal, will the interest be on the remaining amount or the original amount?

Show more
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Bunuel
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