Multiple choice

A loan is to be returned in two equal yearly installments. If the rate of interest is 10% p.a. compounded annually, and each installment is Rs. 5,808, then the total interest charged in this scheme is:

  1. Rs. 1,563

  2. Rs. 1,536

  3. Rs. 1,632

  4. Rs. 1,602

  5. Rs. 1,652
Reveal answer Fill a bubble to check yourself
B Correct answer
AI explanation

The total loan principal equals the present value of both installments, calculated as P = 5808 / (1 + 10/100)^1 + 5808 / (1 + 10/100)^2. This simplifies to 5808 / 1.1 + 5808 / 1.21, which equals 5280 + 4800, giving a principal of Rs. 10080. The total amount paid is 5808 * 2 = Rs. 11616, so the total interest charged is 11616 - 10080 = Rs. 1536.

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