Question

Person borrowed a sum of rs 6000 at 10% p.a., interest compounded annually. if the money is to be repaid in three equal annual installments, each payable at the end of the year, then what is the value of each installment

Answer 1

amount at the end of first year is $6600, amount at the end of 2year is $7260 and amount at the end of 3year is $7986

Answer 2

Installment of First Year Rs.6600

Installment of Second Year Rs.  7260

Installment of Third Year Rs. 7986.

GIVEN: Rs.6000 borrowed at 10% pa.

TO FIND: Installment of three years if interest is calculated compound.

SOLUTION:

According to the question,

Principle amount = 6000

Installment for First Year = 6000 + 10% * 6000

                                         = 6600 Rs.

Where 6000 is the principle money and its 10 percent is calculated as interest.

Installment for Second Year = 6600 + 10% * 6600

                                         = 7260 Rs.

Where 6600 is the principle money carried forward from last year and its 10 percent is calculated as interest.

Installment for Second Year = 7260 + 10% * 7260

                                         = 7986 Rs.

Where 7260 is the principle money carried forward from last year and its 10 percent is calculated as interest.

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