Question

Engineer Faisal borrows Rs. 120,000 from Allied Bank for purchasing a machine. The interest
rate for the loan is 10.5%. How much simple interest will he pay at the end of 5 years? Also
calculate the total amount that he will repay after 5 years.​

Answer 1

Money he borrows = 8000

Interest he will pay = 1360

Total money he will pay after = 8000 + 1360 = 9360

Now he will pay in 12 installments with a difference of 40 in each installment.

This is a form of AP,

where common difference d = -40, number of terms n = 12, and sum of 12 terms is 9360

So,

Sum of n terms in AP is

Sum = n/2 [ 2a + (n - 1)d ]

9360 = 12/2 [ 2a - 40(12 - 1) ]

9360 = 6 [ 2a - 440 ]

1560 = 2a - 440

2a = 2000

a = 1000

nth term in AP is given by:

a(n) = a + (n - 1)d

Last term = 1000 - 40(12 - 1)

=1000 - 440 = 560

Therefore first installment is 1000 and last one is 560.