Question

A man borrows Rs. 5,000 at 12 percent compound interest payable every six months. He repays Rs. 1,800 at the end of every six months. Calculate the third payment he has to make at the end of 18 months in order to clear the entire loan.

Answer 1

For first year,
P = 5000
R =12%
$T=\frac{1}{2}$ year
$I=\frac{PTR}{100}$
$I=5000\times 12\times \frac{1}{100}\times \frac{1}{2}$
A = P + I
A = 5000+ 300
A = 5300
Man repaid = 5300 - 1800
= 3500
For next six month,
P = 3500
R = 12 %
$T=\frac{1}{2}$
$I=\frac{PTR}{100}$
$=3500\times 12\times \frac{1}{100}\times \frac{1}{2}$ \)
= 210
Now we know that

A = P + I
= 3500+ 210
=3710
Man repaid= 3710- 1800
=1910
For last six months ,
P= 1910
R = 12
T = 1/2
$I=\frac{PTR/}{100}$

= 114.6
A = P + I
= 1910+ 114.6
= 2024.6
Man needs to pay 2024.6 to clear the entire loan