Multiple choice

A man borrows $Rs.\ 1,200$ at rate $10$ percent per annum compound interest. If he repays $Rs.\ 250$ at the end of each year, find the amount outstanding at the beginning of the fourth year.

  1. $Rs.\ 769.70$
  2. $Rs. 796$
  3. $Rs. 799.70$
  4. $Rs.\ 777.70$
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A Correct answer
Explanation

Year 1: 1200 * 1.1 - 250 = 1070. Year 2: 1070 * 1.1 - 250 = 927. Year 3: 927 * 1.1 - 250 = 769.70. This is the amount at the beginning of the fourth year.

AI explanation

We calculate the outstanding balance year by year by applying the compound interest formula A = P(1 + r/100) and subtracting the repayment. The balance after the first year is 1200(1.1) - 250 = 1070, the second year is 1070(1.1) - 250 = 927, and the third year is 927(1.1) - 250 = 769.70. The result is Rs. 769.70.

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