Question

Swati took a loan for Rs. 16000 against her insurance policy at the rate of $12\frac{1}{2}\%$ per annum. Calculate the total compound interest payable by Swati after 3 years.

Answer 1

Amount of loan or principal (P) = Rs. 16000
Rate (R) $=12\frac{1}{2}\%=\frac{25}{2}\%p.a$
Period (T) = 3 years
$\therefore$ Interest for the first year $=\frac{PRT}{100}$
$=Rs.\frac{16000\times 25\times 1}{100\times 2}=Rs.2000$
Amount after first year = Rs. 16000 + Rs. 2000 = Rs. 18000
Principal for the second year = Rs. 18,000
$\therefore$ Interest for the second year
$=Rs.\frac{18000\times 25\times 1}{100\times 2}=Rs.2250$
Amount after second year
= Rs. 18000 + 2250 = Rs. 20250
Principal for the third year = Rs. 20250
Interest for the third year $=\frac{20250\times 25\times 1}{100\times 2}$
$=Rs.2531.25$
$\therefore$ Compound for 3 years = Rs. 2000 + Rs. 2250 + 2531.25 = Rs. 6781.25