Multiple choice

Rahul borrowed Rs. 1,00,000 at 8% p.a. interest compounded annually. How much should he repay at the end of the first year (in Rs.), so that by repaying Rs. 54,000 at the end of the second year, he can clear the loan?

  1. 46,000

  2. 54,000

  3. 58,000

  4. 50,000
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Let X be the amount paid at the end of year 1. Balance after year 1 = 100000 * 1.08 - X. Interest on this balance for year 2 = (108000 - X) * 0.08. Total paid at end of year 2 = (108000 - X) * 1.08 = 54000. 108000 - X = 54000 / 1.08 = 50000. X = 108000 - 50000 = 58000.

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