Question

A man borrows 5000 at 12 % compound interest payable every 6 months he repays 1800 at the end of every 6th month. Calculate third payment he has to make at the end of 18 months in order to clear the entire loan

Answer 1

Solution:

(First 6 months i.e. 6 months)

Principal Amount = 5000

Rate = 12%

Time = 6 months = 1/2 year

$Simple \ Interest = Principal * Rate * Time = 5000 * \frac{12}{100} * \frac{1}{2} = 25 * 12 = 300$

Amount paid by man at end of 6 months = 1800

Now , for next 6 months Principal Amount will be =>

Principal Amount + Interest - Amount Paid

5000+300-1800

3500

(Second 6 months i.e 12 months)

Principal Amount = 3500

Rate = 12%

Time = 6 months = 1/2 year

$Simple \ Interest = Principal * Rate * Time = 3500 * \frac{12}{100} * \frac{1}{2} = 35 * 6 = 210$

Amount paid by man at end of 6 months = 1800

Now , for next 6 months Principal Amount will be =>

Principal Amount + Interest - Amount Paid

3500+210-1800

1910

(Third 6 months i.e 18 months)

Principal Amount = 1910

Rate = 12%

Time = 6 months = 1/2 year

$Simple \ Interest = Principal * Rate * Time = 1910 * \frac{12}{100} * \frac{1}{2} = \frac{191 * 6}{10} = \frac{1146}{10} = 114.6$

Total amount which needs to be paid by man at end of 18 months in order to clear entire loan = 1910+114.6 = 2024.6

The total amount which needs to be paid by man at end of 18 months in order to clear the entire loan is 2024.6 or 2025 (after rounding off).