A man borrows Rs 12500 from a bank at 20% compound interest at the end of every year he pays Rs 2000 as part repayment. How much does he still owe to the bank after three such installments?

see full answer

Your Exam Success, Personally Taken Care Of

1:1 expert mentors customize learning to your strength and weaknesses – so you score higher in school , IIT JEE and NEET entrance exams.

An Intiative by Sri Chaitanya

Rs.15600

Rs.12864

Rs.12000

Rs.14320

answer is D.

(Unlock A.I Detailed Solution for FREE)

Best Courses for You

JEE

NEET

Foundation JEE

Foundation NEET

CBSE

Detailed Solution

Concept-
Using the formula A= P(1+rn)(n)(t), where A is the amount, P is the principle, R is the rate of interest, T is the time of investment, and CI is the compound interest, we will compute compound interest for each of the three years, and then remove the installment he pays at the end of each year.
Given that a man borrows Rs. 12500 from a bank at a rate of 20% compound interest, he makes Rs. 2000 in partial payback each year. Amount that must be paid after a year,

A = 12500 1 + 20100 1 A = 12500 1 + 15 A = 1250065 = 15000

After a year, he will need to pay Rs. 15000.
After the first payment, his outstanding balance is equal to (15000 - 2000) = Rs. 13000
Therefore, the second year's principle will be Rs. 13,000
The amount for the following year is now,

A = 13000 1 + 20100 1 A = 13000 1 + 15 A = 1300065 = 15600

After the second year, he must pay Rs. 15600.
After the second payment, his outstanding balance is equal to (15600 - 2000)= Rs. 13600.
Therefore, the third-year principle will be Rs 13600.
The third-year amount will now be,

A = 13600 1 + 20100 1 A = 13600 1 + 15 A = 1360065 = 16320

After the third year, he will be required to pay Rs. 16320.
After the third payment, his outstanding balance is equal to (16320 - 2000) = Rs . 14320.
Hence, the correct option is 4) Rs. 14320.

Watch 3-min video & get full concept clarity