Question

A man borrows 6000 at 5% compound interest. If he repays 1200 at the end of each year, find the amount outstanding at the beginning of the third year.

Answer 1

It is given that

Principal = 6000

Rate of interest = 5% p.a.

We know that

Interest for the first year = Prt/100

Substituting the values

=$(6000\times 5\times 1)/100$

= 300

So the amount after one year = $6000+300=6300$

Principal for the second year = 6300

Amount paid = 1200

So the balance = 6300 - 1200 = 5100

Here

Interest for the second year = $(5100\times 5\times 1)/100=255$

Amount for the second year = $5100+255=5355$

Amount paid = 1200

So the balance = $5355-1200=4155$