Multiple choice

Rachna borrows Rs. 12,000 at 10 per cent annum interest compound half-yearly. She repays Rs. 4,000 at the end of every six months. Calculate the third payment she has to make at the end of 18 month in order to clear the entire loan.

  1. Rs. 5281.50

  2. Rs. 2,678.9

  3. Rs. 2,345.6

  4. Rs. 2,098.7
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A Correct answer
Explanation

Principal 12000, rate 10% per annum (5% per half-year). Period 1: 12000 * 1.05 - 4000 = 12600 - 4000 = 8600. Period 2: 8600 * 1.05 - 4000 = 9030 - 4000 = 5030. Period 3: 5030 * 1.05 = 5281.50.

AI explanation

After six months, the loan plus 5 percent interest is 12600, and subtracting the 4000 payment leaves 8600. After one year, the balance plus 5 percent interest is 9030, and subtracting the 4000 payment leaves 5030. After eighteen months, the final balance plus 5 percent interest is 5281.50, which is her third payment to clear the loan.

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