Multiple choice

A man invested Rs. 24,200 in a fund that would pay him SI at 11% for 3 years. The interest received from this fund was to be used in taking up a loan to be paid back in three annual installments at 10% rate of interest. Find the value of the loan?

  1. Rs. 3310

  2. Rs. 6000

  3. Rs. 6620

  4. Rs. 7986
Reveal answer Fill a bubble to check yourself
C Correct answer
AI explanation

The simple interest from the initial investment is (24200 * 11 * 3) / 100 = 7986. Since the loan is paid back in three equal annual installments of 7986 / 3 = 2662 each at 10% interest, we calculate the principal (loan value) of this ordinary annuity. The present value is 2662 / 1.10 + 2662 / (1.10)^2 + 2662 / (1.10)^3 = 2420 + 2200 + 2000 = Rs. 6620.

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