Question

A man borrows money from a finance company and has to pay it back in two equal half-yearly instalments of Rs. 7,396 each. If the interest is charged by the finance company at the rate of 15% per annum, compounded semi-annually, find the principal and the total
interest paid

Answer 1

Answer:

1512

Step-by-step explanation:

Given A man borrows money from a finance company and has to pay it back in two equal half-yearly installments of Rs. 7,396 each. If the interest is charged by the finance company at the rate of 15% per annum, compounded semi-annually, find the principal and the total  interest paid.

Now we know amount paid in two installments will be 2 x 7396 = Rs 14792

Rate for half yearly will be 15/2%

So Principal for first installment will be

P = 7396 / (1 + 15/2 / 100)

 = 7396 / (1 + 15 / 200)

P = 6880

Again principal for second installment will be

P = 7396 / [(1 + 15/200)^2]

P = 6400

Now P = 6880 + 6400

P = 13,280

Now interest paid will be 14,792 - 13,280 = Rs 1512