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Rajan Borrowed Rs 90,000 at 15% P.A. Compound Interest. If He Repays Rs 35,000 at the End of Each Year, Find the Amount of Loan Outstanding at the Beginning of the Fourth Year.

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Question

Rajan borrowed Rs 90,000 at 15% p.a. compound interest. If he repays Rs 35,000 at the end of each year, find the amount of loan outstanding at the beginning of the fourth year.

Sum
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Solution

P = Rs. 90,000, R = 15 °/o p.a.

Interest for first year 

`=("Rs"  90000 xx 15 xx 1)/100`

= Rs 13500

Amount due after 1st year

= Rs. 90,000 +Rs. 13,500 = Rs 103,500 

Amount paid after 1st year = Rs. 35,000 

Balance amount= Rs. 103,500 - Rs. 35,000 =Rs. 68,500 

Interest for second year

`=("Rs"  68500 xx 15 xx 1)/100`

= Rs 10,275 
Amount due after 2nd year

= Rs. 68,500 + Rs. 10,275 = Rs 78,775 

Amount paid after 2nd year =Rs. 35,000 

Balance amount= Rs. 78,775 - Rs. 35,000 =Rs. 43,775 

Interest for third year

`= ("Rs"  43775 xx 15 xx 1)/100`

= Rs 6,566.25 
Amount due after 3rd year

= Rs. 43,775 +Rs. 6,566.25 = Rs 50,341.25 

Amount paid after 3rd year = Rs.35, 000 

Balance amount = Rs. 50,341.25 - Rs.35, 000

= Rs. 15,341.25 

Loan outstanding at the beginning of the fourth year = Rs 15,341.25  

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