A man borrowed Rs.50,000 from a bank at 10% per annum, compounded annually. At the end of every year, he pays Rs.15,000 as part payment of the loan and interest. How much does he still owe to the bank after three such instalments?
Answer & explanation
Correct answer: option 1
Rate = 10%
Amount = Principal × ( 1 + \(\frac{rate}{100}\))t
Amount he had at the end of 1st year = 50000 × ( 1 + \(\frac{10}{100}\))1 - 15000
= 50000 × \(\frac{11 }{10}\) - 15000
= 55000 - 15000
= 40000
Amount he had at the end of 2nd year = 40000 × ( 1 + \(\frac{10}{100}\))¹ - 15000
= 40000 × \(\frac{11 }{10}\) - 15000
= 44000 - 15000
= 29000
Amount he had at the end of 3rd year = 29000 × ( 1 + \(\frac{10}{100}\))¹ - 15000
= 29000 × \(\frac{11 }{10}\) - 15000
= 31900 - 15000
= Rs.16900