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Question 94
A certain loan was retumed in two equal half yearly instalments each of ₹6,760, If the rate of interest was 8% p.a., compounded yearly, how much was the interest paid on the loan?
Solution
There are half yearly installments so r = 8/2 = 4%
Sum borrow = $$\frac{installment}{1 + \frac{4}{100}} + \frac{installment}{(1 + \frac{4}{100})^2}$$
= $$\frac{6,760}{1 + \frac{4}{100}} + \frac{6,760}{(1 + \frac{4}{100})^2}$$
= $$6,760 \times 1.04 + 6,760 \times (1.04)^2$$ = 6500 + 6250 = Rs. 12750
Sum paid = 6760 $$\times$$ 2 = 13250
Interest paid = sum paid - sum borrow = 13250 - 12750 = Rs. 770
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