compound interest

Question

 1)A man borrowed Rs.25000 from a bank at 20% compound interest. At the end of every year he paid Rs.8000. At the end of third year, if he wants to clear his loan then how much should he pay?

(a) Rs.12400  (b) Rs.16040

(c) Rs.20800  (d) Rs.22080

2) Rajesh borrowed Rs.21000 at the rate of 10% p.a. compound interest. If the amount has to be repaid in two equal installments, find the value of each installment.

(a) Rs.11000  (b) Rs.11500

(c) Rs.12100  (d) Rs.12500

 

Answer 1

1. Amount after one year $ = 25000 \times 1.2  - 8000 = 22000$.

Amount after 2 years $= 22000 \times 1.2 - 8000 = 18400$.

So, amount remaining after 3 years $= 18400 \times 1.2 = 22080$.

2. Amount after 1 year $=21000 \times 1.1 = 23100$.

Let $x$ be the amount he pays per instalment.

So, amount remaining after 1 year $= 23100 - x$.

Amount after 2 years $= (23100-x) \times 1.1$.

Now, $$(23100 -x) \times 1.1 = x \\ \implies 25410 = 2.1x \\ \implies x =  12100$$.

Comments

Does this mean borrower has earned interest on the amount and then paid to bank after one year or does the bank has invested the money and earning interest

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obviously the bank invested and is earning interest.