Question 7

A man borrows Rs 4000 at 15% compound interest. At the end of each year, he pays back Rs 1500. How much additional amount is required to pay at the end of third year to clear all his dues :

Solution

Initial amount = Rs 4000

Compounded amount after one year = $$4000\left(1+\frac{15}{100}\right)=4600$$

Final amount after one year = 4600 - 1500 = Rs 3100

Compounded amount after at the end of two years = $$3100\left(1+\frac{15}{100}\right)=3565$$

Final amount at the end of two years = 3565-1500 = Rs 2065

Compounded amount after at the end of three years = $$2065\left(1+\frac{15}{100}\right)=2374.75$$

Final additional amount at the end of three years = 2374.75-1500 = Rs 874.75

The answer is option D.

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