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Archana Borrowed Rs 18,000 from Ritu at 12% P.A. Compound Interest

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Question

Archana borrowed Rs 18,000 from Ritu at 12% p.a. compound interest. If at the end of the 1st, 2nd, and 3rd years, Archana returned Rs 5,250, Rs 5,875 and Rs 6,875 respectively, find the amount Archana has to pay Ritu at the end of the 4th year to clear her debt.

Sum
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Solution

P = Rs. 18,000, R = 12 °/o p.a.

Interest for first year 

`= ("Rs"  18000 xx 12 xx 1)/100`

= Rs 2,160 
Amount due after 1" year

= Rs. 18,000 + Rs. 2, 160 = Rs 20,160 

Amount paid after 1st year = Rs. 5,250 

Balance amount = Rs. 20, 160 - Rs. 5,250 = Rs. 14,910 

Interest for seoond year

`= ("Rs"  14910 xx 12 xx 1)/100`

= Rs 1789.20 
Amount due after 2nd year

=Rs. 14,910 + Rs. 1,789.20

= Rs 16,699.20

Amount paid after 2nd year = Rs. 5,875 

Balance amount = Rs. 16,699.20- Rs. 5,875 = Rs. 10,824.20 

Interest for third year

`= ("Rs"  10824.20 xx 12 xx 1)/100`

= Rs 1,298.904 
Amount due after 3rd year

= Rs. 10,824.20 + Rs. 1,298.904 = Rs 12, 123.10 

Amount paid after 3rd year = Rs. 6,875 

Balance amount = Rs. 12, 123.10- Rs. 6,875 = Rs. 5,248.104 

Interest for fourth year

`= ("Rs"  5248.104 xx 12 xx 1)/100`

= Rs 629.7725

Amount due after 4th year =Rs. 5,248.104 +Rs. 629.7725 = Rs 5877 .876 

=Rs 5877.87 

Archana needs to pay Rs 5877 .87 to Ritu at the end of 4th year to clear

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Concept of Compound Interest - Compound Interest as a Repeated Simple Interest Computation with a Growing Principal
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