Advertisement Remove all ads

Advertisement Remove all ads

Sum

**Solve the following :**

A man borrowed some money and paid back in 3 equal installments of ₹2,160 each. What amount did he borrow if the rate of interest was 20% per annum compounded annually? Also find the total interest charged. [(1.2)^{3} = 0.5787]

Advertisement Remove all ads

#### Solution

Given, C = ₹2,160, n = 3 years, r = 20% p.a.

∴ i = `"r"/(100) = (2)/(100)` = 0.2

Here, we have to find present value of annuity.

∴ P = `"C"/"i"[1 - (1 + "i")^-"n"]`

= `(2,160)/(0.2)[1 - (1 + 0.2)^-3]`

= 10,800[1 – (1.2)^{–3}]

= 10,800[1 – 0.5787]

= 10,800[0.4213]

∴ P = ₹4,550

The man has paid 3 equal instalments of ₹2,160 each.

∴ Total paid value of instalments

= 3 x 2,160

= ₹6,480

Interest = Total paid value of instalments – Present Value

= 6,480 – 4,550

= ₹1,930.

Concept: Annuity

Is there an error in this question or solution?

Advertisement Remove all ads

#### APPEARS IN

Advertisement Remove all ads