Multiple choice

A man borrows Rs. 8,000 at 10% compound interest payable every six months. He repays Rs. 2,500 at the end of every six months. Calculate the third payment he has to make at the end of 18 months in order to clear the entire loan.

  1. 3879.57

  2. 3879.75

  3. 3879.76

  4. 3879.89
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Principal = 8000, rate = 10% per annum, compounded half-yearly (5% per 6 months). Period 1: Interest = 8000 * 0.05 = 400. Balance = 8400 - 2500 = 5900. Period 2: Interest = 5900 * 0.05 = 295. Balance = 6195 - 2500 = 3695. Period 3: Interest = 3695 * 0.05 = 184.75. Final payment = 3695 + 184.75 = 3879.75.

AI explanation

Using the compound interest formula for half yearly periods, the rate is 5 percent per period. After 6 months, the balance is 8000 multiplied by 1.05 minus 2500, yielding 5900. After 12 months, the balance is 5900 multiplied by 1.05 minus 2500, yielding 3695. After 18 months, the final amount due before the last payment is 3695 multiplied by 1.05, resulting in a third payment of Rs 3879.75.

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