Question
Download Solution PDFLoan is to be repaid in two equal yearly instalments. If the rate of interest is 10% per annum, compounded annually, and each instalment is Rs.6,897, then find the total interest charged.
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFGiven:
Amount of each installment = Rs. 6,897
Rate of interest compounded annually = 10%
Number of years (n) = 2
Concept used:
P = A/[1 + (R/100)]n
Interest = 2 × Installment – P
Calculation:
Let the loan amount be P.
P = 6897/[1 + (10/100)] + 6897/[1 + (10/100)]2
⇒ P = 6897 [1 / (1 + 1/10) + 1 / (1 + 1/10)2]
⇒ P = 6897 [1 / (11/10) + 1/ (11/10)2]
⇒ P = 6897 [10/11 + (10/11)2]
⇒ P = 6897 [10/11 + 100/121]
⇒ P = 6897 [(110 + 100)/121]
⇒ P = 6897 × 210/121
⇒ P = 57 × 210 = 11970
Interest = 2 × 6897 – 11970
⇒ 13794 – 11970 = 1824
∴ The total interest charged in this scheme is Rs. 1,824.
Last updated on May 28, 2025
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