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Question

Peter borrows Rs. 12000 for 2 years at 10% p.a. compound interest. He repays Rs. 8000 at the end of first year. Find:
(i) the amount at the end of first year, before making the repayment.
(ii) the amount at the end of first year, after making the repayment.
(iii) the principal for the second year.
(iv) the amount to be paid at the end of second year, to clear the account.

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Solution

Sum borrowed=Rs. 12000
Rate(R) =10% p.a. compound annually
Time(T)= 2 years
Interest for the first year= PTR100
=12000×100×1100=Rs.1200
(i) Amount =Rs. 12000+1200=Rs. 13200
Amount paid= Rs.8000
(ii) Balance amount= Rs. 13200-8000=Rs.5200
(iii) Principal for the second year=Rs. 5200
(iv) Interest for the second year= 5200×10×1100
=Rs. 520
Amount= Rs. 5200+520=Rs. 5720

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