A bank charges Rs. 6 for a loan of Rs. 120. The borrower receives Rs. 114 ' and repays the loan in 12 installments of Rs. 10 a month. The interest rate is approximate.

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Solution

The correct option is D 5%
Total sum of money paid = Rs 120
$∴ 120 = P {(1 + \frac{r}{n})}^{n t}$
t = 1 year ( $∵$ 1 year = 12 months)
n = 12
P = Rs 114
$⟹ 120 = 114 {(1 + \frac{r}{12 (100)})}^{12} ⟹ {(\frac{120}{114})}^{\frac{1}{12}} - 1 = \frac{r}{1200} ⟹ r = 5.12 % ∴ r \approx 5 %$

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A bank charges Rs. 6 for a loan of Rs. 120. The borrower receives Rs. 114 ' and repays the loan in 12 installments of Rs. 10 a month. The interest rate is approximate.

The correct option is D 5%Total sum of money paid = Rs 120∴120=P(1+rn)ntt = 1 year (∵ 1 year = 12 months)n = 12P = Rs 114⟹120=114(1+r12(100))12⟹(120114)112−1=r1200⟹r=5.12%∴r≈5%

The correct option is D 5%
Total sum of money paid = Rs 120
$∴ 120 = P {(1 + \frac{r}{n})}^{n t}$
t = 1 year ( $∵$ 1 year = 12 months)
n = 12
P = Rs 114
$⟹ 120 = 114 {(1 + \frac{r}{12 (100)})}^{12} ⟹ {(\frac{120}{114})}^{\frac{1}{12}} - 1 = \frac{r}{1200} ⟹ r = 5.12 % ∴ r \approx 5 %$