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Question

Ravi buys a car worth ₹4.5 lakhs. The car's value depreciates by 20% each year. He drives it for 2 years and sells it for ₹3 lakhs. Find his overall profit or loss % in this transaction.

A
5.33%
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B
3.75%
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C
4.16%
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D
5.86%
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Solution

The correct option is C 4.16%
Original value of the car = ₹4.5 lakhs

After 1st year depreciation, value of the car = 4.5 lakhs - 20% of 4.5 lakhs
=4.520100×4.5=4.50.9
= ₹3.6 lakhs

After 2nd year depreciation, value of the car = 3.6 lakhs - 20% of 3.6 lakhs
=3.620100×3.6
= ₹2.88 lakhs

He sold it for ₹3 lakhs.

Profit = 3 lakhs - 2.88 lakhs = 0.12 lakhs = ₹12000

Profit % has to be calculated on the depreciated value after 2 years and not on the original cost price.

Profit % = 12000288000×100 = 4.16%

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