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
Each year ₹25,000 of principal is repaid, so the balance on which 12% interest is charged falls by ₹25,000 a year.
Balance at the start of Year 1 = ₹1,00,000; interest = ₹12,000
Balance at the start of Year 2 = ₹75,000; interest = ₹9,000
Balance at the start of Year 3 = ₹50,000; interest = ₹6,000
Balance at the start of Year 4 = ₹25,000; interest = ₹25,000 × 12% = ₹3,000
₹6,000 is the interest of the third year, not the fourth.
NCERT (2026-27 edition):
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