A loan of RS102000 is to be paid back in two equal annual instalments...
Total Interest Charged on a Loan with Equal Annual Installments
To calculate the total interest charged on a loan with equal annual installments, we need to consider the loan amount, the interest rate, and the duration of repayment. In this case, the loan amount is RS102000, the interest rate is 4%, and the loan is to be repaid in two equal annual installments.
Calculation of Installment Amount
To calculate the equal annual installment amount, we divide the loan amount by the number of years of repayment. In this case, the loan is to be repaid in two years, so the annual installment amount would be RS102000 / 2 = RS51000.
Calculation of Interest for the First Year
For the first year, the interest is calculated on the outstanding loan amount. Initially, the outstanding loan amount is RS102000. The interest rate is 4%, so the interest for the first year would be RS102000 * 4% = RS4080.
Therefore, the first installment consists of the annual installment amount (RS51000) plus the interest for the first year (RS4080), which equals RS51000 + RS4080 = RS55080.
Calculation of Interest for the Second Year
For the second year, the interest is calculated on the remaining outstanding loan amount. After paying the first installment of RS55080, the remaining outstanding loan amount is RS102000 - RS55080 = RS46920.
The interest for the second year would be RS46920 * 4% = RS1876.80.
Therefore, the second installment consists of the annual installment amount (RS51000) plus the interest for the second year (RS1876.80), which equals RS51000 + RS1876.80 = RS52876.80.
Total Interest Charged
To calculate the total interest charged, we sum up the interest for the first year and the interest for the second year.
Total interest charged = RS4080 + RS1876.80 = RS5956.80
Therefore, the total interest charged on the loan is RS5956.80.
Summary:
To summarize, a loan of RS102000 is to be paid back in two equal annual installments. The interest rate is 4%. The first installment consists of the annual installment amount (RS51000) plus the interest for the first year (RS4080). The second installment consists of the annual installment amount (RS51000) plus the interest for the second year (RS1876.80). The total interest charged on the loan is RS5956.80.