Naimish borrows Rs. 40000 from Axix Bank at rate of 7.50% per annum at compund interest. At end of every year he pays Rs. 15000 which consist of interest and a part of a loan repayment. How much more he has to pay at the end of third year to finish his loan.

Year 1: Principal = Rs. 40,000. Interest at 7.5% = Rs. 3,000. After paying Rs. 15,000, remaining principal = 28,000. Year 2: Interest on Rs. 28,000 at 7.5% = Rs. 2,100. After paying Rs. 15,000, remaining principal = 15,100. Year 3: Interest on Rs. 15,100 at 7.5% = Rs. 1,132.50. Total due = 15,100 + 1,132.50 = Rs. 16,232.50. If he pays the usual Rs. 15,000, the remaining amount to clear the loan = 16,232.50 - 15,000 = Rs. 1,232.50. Key insight: Compound interest is calculated on the outstanding balance each year, and payments first cover interest then reduce principal.