Aman borrows a sum of ₹192208 at the rate of 15% per annum simple interest. At the end of the first year, he repays ₹20196 towards return of principal amount borrowed. If Aman clears all pending dues at the end of the second year, including interest payment that accrued during the first year, how much does he pay (in ₹) at the end of the second year?

Correct — D. Track the principal first, then charge interest on whatever principal is outstanding that year.

Year 1 interest = 15% of 1,92,208 = ₹28,831.20
The ₹20,196 repaid at the end of year 1 goes entirely to principal, as the stem says.
Principal left = 1,92,208 − 20,196 = ₹1,72,012

Year 2 interest = 15% of 1,72,012 = ₹25,801.80
Simple interest, so the second year is charged on the reduced principal and the unpaid first-year interest earns nothing.

Final payment = 1,72,012 + 28,831.20 + 25,801.80
= ₹2,26,645 → option (d).

Why the others are wrong

• (a)
  221777 — ₹2,21,777 falls ₹4,868 short of the dues. The three pieces are exact — 1,72,012 of principal, ₹28,831.20 and ₹25,801.80 of interest — so there is no rounding to close the gap.
• (b)
  221757 — ₹2,21,757 sits ₹4,888 below the total and just ₹20 from option (a) — a pair placed to catch a slip in the last digits rather than a method error.
• (c)
  230028 — ₹2,30,028 overshoots by ₹3,383. Even the commonest method error, charging year 2 on the full ₹1,92,208, gives ₹2,29,674.40 — simple interest always runs on the outstanding principal.

Simple interest is charged on the outstanding principal, and interest that goes unpaid never itself earns interest. Both halves of that sentence matter here.

The ₹20,196 is described as going "towards return of principal amount borrowed", so it cuts the base for year 2 from ₹1,92,208 to ₹1,72,012.

The first year's ₹28,831.20 of interest stays owing through year 2 and is simply added at the end — under compound interest it would have been charged interest of its own.

The final payment is therefore three separate amounts summed, not one formula applied once.

Key facts

• Simple interest is charged on the outstanding principal, never on principal plus accrued interest.
• 15% of ₹1,92,208 is ₹28,831.20.
• After the ₹20,196 principal repayment the outstanding principal is ₹1,72,012.
• 15% of ₹1,72,012 is ₹25,801.80.

Common traps

• Charging year 2's interest on the original ₹1,92,208, ignoring the repayment.
• Treating the ₹20,196 as an interest payment, which the stem explicitly rules out.
• Compounding the first year's interest, when nothing in a simple-interest question compounds.

No directly related past PYQ was found.