Question

Anand obtained a loan of Rs 125000 from the Allahabad Bank for buying computers. The bank charges compound interest at 8% per annum, compounded annually. What amount wil he have to pay after 3 years to clear the debt?

Answer 1

$$\begin{gathered} \mathrm{Principal}\mathrm{amount},\mathit{}P=\mathrm{Rs}.125000 \\ \mathrm{Rate}\mathrm{of}\mathrm{interest},R=8\%\mathrm{p}.\mathrm{a}. \\ \mathrm{Time},n=3\mathrm{year}s \\ \mathrm{The}\mathrm{amount}\mathrm{including}\mathrm{the}\mathrm{compound}\mathrm{interest}\mathrm{is}\mathrm{calculated}\mathrm{using}\mathrm{the}\mathrm{formula}, \\ A=\mathrm{Rs}.\mathrm{P}{\left(1+\frac{R}{100}\right)}^n \\ =\mathrm{Rs}.125000{\left(1+\frac{8}{100}\right)}^3 \\ =\mathrm{Rs}.125000{\left(\frac{100+8}{100}\right)}^3 \\ =\mathrm{Rs}.125000{\left(\frac{108}{100}\right)}^3 \\ =\mathrm{Rs}.125000{\left(1.08\right)}^3 \\ =\mathrm{Rs}.125000\left(1.08\times 1.08\times 1.08\right) \\ =\mathrm{Rs}.157464 \\ \therefore \mathrm{Anand}\mathrm{has}\mathrm{to}\mathrm{pay}\mathrm{Rs}157464\mathrm{after}3\mathrm{years}\mathrm{to}\mathrm{clear}\mathrm{the}\mathrm{debt}. \end{gathered}$$