Calculation of Instalment Amount for Loan Repayment

Given:

• Principal amount (P) = Rs. 8000


• Rate of interest (R) = 5% per annum


• Time period (n) = 3 years

Calculation of Total Amount Payable


The interest on the loan is compounded annually. Therefore, the total amount payable after 3 years can be calculated using the compound interest formula:

A = P(1 + R/100)^n

Where A is the total amount payable, P is the principal amount, R is the rate of interest, and n is the time period.

Substituting the given values, we get:

A = 8000(1 + 5/100)^3 = Rs. 9261

Therefore, the total amount payable after 3 years is Rs. 9261.

Calculation of Instalment Amount


Since the loan is to be repaid in 3 equal annual instalments, the instalment amount can be calculated using the annuity formula:

PMT = A/(1 + r)^n - 1)/r

Where PMT is the instalment amount, A is the total amount payable, r is the rate of interest per instalment period, and n is the total number of instalments.

Since the loan is to be repaid in 3 equal annual instalments, n = 3.

The rate of interest per instalment period can be calculated as follows:

r = R/100 = 5/100 = 0.05

Substituting the given values, we get:

PMT = 9261/(1 + 0.05)^3 - 1)/0.05 = Rs. 3415.77

Therefore, the amount of each instalment is Rs. 3415.77 (rounded off to the nearest paisa).

Conclusion


The amount of each instalment for the loan repayment is Rs. 3415.77, and a total of 3 instalments will be paid over a period of 3 years to repay the loan.