Question

A person took a loan of Rs 150000for tw years at the rate of 10% annual compound interest To reduce interest and loan partly he paid Rs 85000 at the end of first year

a) Now how many rupees should he have to pay at the end of second year to clear his debt
b) If he had paid the loan only at the end of second year how much less or more interest should have to be paid?

Answer 1

a) To calculate the remaining balance on the loan at the end of the first year, you need to first calculate the interest that has accumulated on the loan. This can be done using the formula:

Interest = Principal x Rate x Time

In this case, the interest for the first year would be:

Interest = 150000 x (10/100) x 1 = 15000

So the total amount owed at the end of the first year, including interest, would be:

Total = Principal + Interest = 150000 + 15000 = 165000

Now, after paying Rs 85000 at the end of the first year, the remaining balance on the loan would be:

Remaining Balance = Total - Payment = 165000 - 85000 = 80000

To calculate the amount that needs to be paid at the end of the second year, you need to calculate the interest that has accumulated on the remaining balance of the loan. This can be done using the same formula as before:

Interest = Remaining Balance x Rate x Time = 80000 x (10/100) x 1 = 8000

So the total amount that needs to be paid at the end of the second year would be:

Total = Remaining Balance + Interest = 80000 + 8000 = 88000

b) If he had paid the loan only at the end of second year, the interest would have been:

Interest = Principal x Rate x Time = 150000 x (10/100) x 2 = 30000

Thus, he would have paid 30,000 more than he paid by paying partly at the end of first year.

Explanation: