Question

A customer borrowed 2000 and then further 1000 both repayable in 12 months .What would he have saved if he had taken out one loan for 3000 repayable in 12 months

Answer 1

No savings

Explanation:

Let the interest rate be same for all the loans and consider it to be R.

First case

Principal 1 = 2000

Time = 12 moths =
`(12)/(12)` = 1 year

Rate = R %

So, interest 1 = Principal * Time * Rate

= 2000 * 1 * R

= 2000R

Now,

Principal 2 = 1000

Time = 12 moths =
`(12)/(12)` = 1 year

Rate = R %

So, interest 2 = Principal * Time * Rate

= 1000 * 1 * R

= 1000R

Total interest to be paid = 2000R + 1000R

= 3000R

Second case

Principal = 3000

Time = 12 moths =
`(12)/(12)` = 1 year

Rate = R %

Interest = Principal * Time * Rate

= 3000 * 1 * R

= 3000R

We conclude that there would be no savings because the interest to be paid in both the cases are same.