Question

A man borrows Rs. 8,500 at 10% compound interest. If he repays Rs, 2,700 at the end of each year, find the amount of the loan outstanding at the beginning of the third year.

Answer 1

$P_1$=Rs 8500,R=10%

For the first year

$A_1=8500(1+\frac{10}{100})$

$=8500\times \frac{10}{100}$

$=Rs9350$

At the end of the year he repays Rs. 2700 then

The amount of loan for the second year

$P_2=A_1-repayamt$

$=9350-2700$

$=Rs.6650$

$A_2=6650(1+\frac{10}{100})$

$=6650\times \frac{110}{100}$

$=Rs.7315$

At the end of the year he repays Rs. 2700 then

The amount of loan for the third year

$P_3=A_2-repayamt$

$=7315-2700$

$=Rs.4615$