Cash sale vs 1-year credit at 10% p.a.: Shankara buys a watch for Rs 1,950 in cash and sells it for Rs 2,200 on 1-year credit when the simple interest rate is 10% p.a. What is his gain or loss measured in present terms?

Introduction / Context:
When selling on credit, compare present worth of the credited price against the cash cost using the market rate of simple interest. Profit or loss should be evaluated at the same time base (present time).

Given Data / Assumptions:

• Cash cost = Rs 1,950.
• Credit selling price after 1 year = Rs 2,200.
• Rate r = 10% p.a.

Concept / Approach:
Present worth PW of Rs 2,200 due in 1 year at 10%: PW = 2200 / (1 + 0.10) = 2200/1.10.

Step-by-Step Solution:

Verification / Alternative check:
Future value of cost after 1 year at 10% is 1950 * 1.10 = 2145. Comparing future values: 2200 − 2145 = 55. On a present basis, gain is Rs 50; the question asks for present-terms gain.

Why Other Options Are Wrong:
Rs 55 is the 1-year future-value gain (not present); losses do not apply since PW exceeds cost.

Common Pitfalls:
Comparing future and present amounts directly; forgetting to discount the credit price.

Final Answer:
gains Rs. 50