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Question
A man borrows Rs. 6,000 at 5% C.I. per annum. If he repays Rs. 1,200 at the end of each year, find the amount of the loan outstanding at the beginning of the third year.
Sum
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Solution
Given that the amount borrowed = Rs. 6,000.
Rate per annum = 5%
Interest on Rs. 6,000 = `5/100` × Rs. 6,000 = Rs. 300
So, amount at the end of the first year = Rs. 6,000 + Rs. 300 = Rs. 6,300
Amount left to be paid = Rs. 6,300 - Rs. 1,200 = Rs. 5,100.
Interest on Rs. 5,100 = `5/100` × Rs. 5,100 = Rs. 255
So, amount at the end of the second year = Rs. 5,100 + Rs. 255 = Rs. 5,355.
Amount left to be paid = Rs. 5,355 - Rs. 1,200 = Rs. 4,155.
Hence, the amount of the loan outs tan ding at the beginning of the third year is Rs. 4,155.
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Concept of Compound Interest - Compound Interest as a Repeated Simple Interest Computation with a Growing Principal
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