Skip to content

CMA Final · Strategic Financial Management · Digital Finance

A digital lender, QuickRupee, disburses Rs 50,000 unsecured loans through an app. Each loan earns 24% p.a. simple interest for 1 year, repaid in full at year end. Expected default rate is 6% with zero recovery on defaulted loans (the principal and interest are both lost). Funding cost is 9% p.a. on the principal. Ignoring other costs, what is the expected net profit per loan disbursed?

Expected receipt is 94% of Rs 62,000, which is Rs 58,280. Less principal plus funding cost of Rs 54,500, net expected profit is Rs 3,780 per loan. This does not match the listed options exactly.

  1. ARs 2,200Correct
  2. BRs 4,500
  3. CRs 3,000
  4. DRs 5,000

Explanation

Repayment on a good loan = 50,000 x 1.24 = 62,000. Expected receipt = 62,000 x 0.94 = 58,280. Funding cost = 50,000 x 1.09 = 54,500. Net = 58,280 - 54,500 = 3,780, which is not among options; the closest listed value is not equal, so the item data fail to reconcile.

Did you get it right without looking?

One question tells you little. A timed set on Digital Finance shows your real accuracy, how long you take and where you lose marks.

Practise Digital FinanceFree diagnostic mock

More Digital Finance questions