Multiple choice

Sasidharan took a loan of Rs. 20,000 to purchase a colour TV set from Royal Finance Co. He promised to make the payment after three years. The company charges compound interest @ 10% p.a. for the same. But, suddenly the company announces the rate of interest as 15% p.a. for the last one year of the loan period. What extra amount Sasidharan has to pay due to his announcement of now rate of interest?

  1. Rs. 7,830

  2. Rs. 6,620

  3. Rs. 4,410

  4. Rs. 1210

  5. Rs. 3,000
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Original interest: 20000 * (1.1)^3 = 26620. New interest: 20000 * (1.1)^2 * 1.15 = 20000 * 1.21 * 1.15 = 27830. Difference = 27830 - 26620 = 1210.

AI explanation

First, calculate the amount due for the first two years at 10% compound interest, which is 20000 multiplied by 1.1 squared to get 24200. For the third year, compare the two possible final amounts: 24200 multiplied by 1.15 under the new rate minus 24200 multiplied by 1.10 under the old rate. This gives an extra amount of 27830 minus 26620, resulting in a difference of Rs. 1210.

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