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:

(i) Amit gave his friend Rs 11000.

(ii) This loan is to be repaid in 3 yearly installment with a rate of interest of 20% compounded annually .

To Find:

(i) How much would be the value of each installment

Solution:

We know that, in compound interest, total amount (A) is given as:

A = P (1 + r/100)^t

where t is the total time period,

r is rate,

and P is principal money

Now, we have to find, the amount paid in first installment;

P = Rs 11000, t = 1 year and r = 20%

A = P (1 + r/100)^t

= 11000(1 + 0.2)^1

= Rs 13200

Similarly, the amount paid in second installment is

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

A = P (1 + r/100)^t

=  13200(1 + 0.2)^1

= Rs 15480

Amount paid in third installment;

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

=  15480 (1 + 0.2)^1

= Rs 19008

So, the amount paid in first installment is Rs 13200

The amount paid in second installment is Rs 15840

The amount paid in third installment is Rs 19008