Answer the questions from based on following paragraph.
Preeti, Kabir and Shershah are partners in a firm. Kabir retires from the firm. On his date of retirement, ₹1,00,000 became due to him. Preeti and Shershah promised to pay him in four yearly equal installments plus interest @ 12% p.a. on the unpaid balance every year at the end of the year, to which he agreed.
The amount of interest payable at the end of fourth year will be:
Answer & explanation
Correct answer: option 3
The correct answer is option 3- ₹3,000.
Total due amount = 1,00,000
Installments = 4
Each installment = 1,00,000/4
= 25,000
* Ist installment = 25,000
Remaining balance after Ist installment = 1,00,000 - 25,000
= 75,000
* 2nd installment = 25,000
Remaining balance after 2nd installment = 75,000 - 25,000
= 50,000
* 3rd installment = 25,000
Remaining balance after 3rd installment = 50,000 - 25,000
= 25,000
* 4th installment = 25,000
Interest payable with 4th installment = 25,000 x 12/100
= 3,000
So, the amount of interest payable at the end of fourth year will be 3,000.