Question

you have to loan Rs 75000 for 2 years for a purpose. if a finance company A lends money at 10% per annum compounded annually and Finance Company B lends money at 8% per annum compounded semi annually for which Finance Company will you take the loan and why give your reason with calculation​

Answer 1

He will take the loan from Company B.

Explanation:

Given,

For Company A

Principal (P) = Rs 75000

Time (T) = 2 years

Rate of interest (R) = 10%

For Company B

Principal (P) = Rs 75000

Time (T) = 2 years

Rate of interest (R) = 8%

To find the amount of the loan he has to pay for both the companies.

Formula

Amount =P
`(1+(R)/(100) )^(T)`

Amount= P
`(1+(R)/(100Xn) )^(nT)`

For Company A

Amount = 75000
`(1+(10)/(100)) ^(2)` [ Here, P= 75000, T=2 and R = 10%]

= 194530 (approx)

For Company B

Amount = 75000(
`(1+(8)/(200) )^(4)` [ Here, P= 75000, T=2, n = 2 and R = 8%]

= 87739 (approx)

Hence,

He will take the loan from Company B, because he has to pay less money for this company.