Question

A man borrowed Rs.25000 from a bank at 20% compound interest. At the end of every year he paid 8000. At the end of the third year, he wanted to clear the loan. How much should he pay to clear the loan?

• A. 12400
• B. 16040
• C. 20800
• D. 22080

Answer 1

The correct option is D 22080

Compound Interest is nothing but Simple interest per year with the amount at the end of every year being the principal for the next year.
For the first year ,
Simple Interest $SI=\frac{PNR}{100}$
So, $SI=\frac{25000\times 1\times 20}{100}=Rs5000$
So, Amount $A=25000+5000=Rs30000$
For the second year ,
P $=30000-8000=Rs22000$
So, $SI=\frac{22000\times 1\times 20}{100}=Rs4400$
So, Amount $A=22000+4400=Rs26400$
For the third year ,
P $=26400-8000=Rs18400$
So, $SI=\frac{18400\times 1\times 20}{100}=Rs3680$
So, Amount $A=18400+3680=Rs22080$
So, $Rs22080$ has to paid off to clear the loan.