A loan of 102000 is to be paid back in two equal annual instalments . ...
A=V÷P(n, i)
p(2, 4%) = (1+0.14) ^2-1÷(1+0.14) ^2*0.14
=1.886094
A= 102000/1.886094=54080
2equal annual installments =54080+54080=108160
108160-102000=6160 -- total interest
A loan of 102000 is to be paid back in two equal annual instalments . ...
Calculation of Total Interest Charged Under Instalment Plan
Given information:
- Loan amount = 102000
- Instalment period = 2 years
- Rate of interest = 4% p.a
- Interest compounded annually
To calculate the total interest charged under instalment plan, we need to follow the below steps:
Step 1: Calculate the annual instalment amount
- Since the loan is to be paid back in two equal annual instalments, we can divide the loan amount by 2 to get the annual instalment amount.
- Annual instalment amount = 102000 / 2 = 51000
Step 2: Calculate the interest for the first year
- To calculate the interest for the first year, we need to use the formula for compound interest: A = P(1 + r/n)^(nt), where A is the amount at the end of the period, P is the principal amount, r is the rate of interest, t is the time period, and n is the number of times the interest is compounded per year.
- Here, P = 102000, r = 4%, n = 1 (since interest is compounded annually), t = 1 (since we are calculating interest for the first year).
- Putting these values in the formula, we get: A = 102000(1 + 0.04/1)^(1*1) = 106080
- So, the interest for the first year is: 106080 - 102000 = 4080
Step 3: Calculate the interest for the second year
- To calculate the interest for the second year, we need to use the same formula, but with a different value of t.
- Here, P = 51000 (since we are paying back the loan in two equal instalments), r = 4%, n = 1, t = 1.
- Putting these values in the formula, we get: A = 51000(1 + 0.04/1)^(1*1) = 53040
- So, the interest for the second year is: 53040 - 51000 = 2040
Step 4: Calculate the total interest charged
- To calculate the total interest charged, we need to add the interest for both years.
- Total interest charged = 4080 + 2040 = 6120
Therefore, the total interest charged under instalment plan is 6120.
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