Question

14. Amit gave his friend Rs. 11000. This
loan was to be repaid in 3 yearly
installments with a rate of interest of 20%
compounded annually. How much would
be the value of each installment?
​

Answer 1

Given:

Amit gave his friend RS 11000. This loan is to be repaid in 3 yearly installment with a rate of interest of 20% compounded annually .

To Find:

How much would be the value of each installment

Solution:

Compound interest

$A = P(1 + \frac{r}{100} )^{t}$

Where t is the time period, r is rate and P is principal

A is the amount.

Compound interest is basically concept of successive percentage change.

Amount paid in first installment;

P = Rs 11000   t = 1 year and r = 20%

$A= 11000(1+.20)^{1}\\A = Rs 13200$

Amount paid in second installment;

P = Rs 13200 t = 1 year r = 20%

$A = 13200(1 + .20)^{1} )$

A = Rs 15840

Amount paid in third installment;

P = Rs 15840 t = 1 year r = 20%

$A = 15840(1+.20)^{1} \\A = Rs 19008$

Amount paid in first installment: Rs 13200

Amount paid in second installment: Rs 15840

Amount paid in third installment: Rs 19008