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A company borrowed rs. 10000 on condition to repay it with compound interest at 5% p.a. by annual installment of rs.1000 each. The number of years by which the debt will be clear is?
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A company borrowed rs. 10000 on condition to repay it with compound in...
Understanding the Problem
The company has borrowed Rs. 10,000 and needs to repay it with compound interest at a rate of 5% per annum through annual installments of Rs. 1,000.
Calculating Compound Interest
- Principal Amount (P): Rs. 10,000
- Rate of Interest (R): 5% per annum
- Installment Amount (I): Rs. 1,000
Calculation Steps
1. First Year Payment:
- Interest for the first year = 10,000 * 5% = Rs. 500
- Total amount after interest = 10,000 + 500 = Rs. 10,500
- After paying Rs. 1,000, remaining debt = 10,500 - 1,000 = Rs. 9,500
2. Second Year Payment:
- Interest for the second year = 9,500 * 5% = Rs. 475
- Total amount after interest = 9,500 + 475 = Rs. 9,975
- After paying Rs. 1,000, remaining debt = 9,975 - 1,000 = Rs. 8,975
3. Subsequent Years:
- Repeat the process of calculating interest on the remaining balance, adding it to the principal, and subtracting the installment.
Continuing the Process
- This process continues until the remaining debt is cleared.
- Each year, the interest amount decreases as the principal decreases, allowing more of the installment to go towards reducing the principal.
Final Calculation
Upon repeating the above steps, you will find that the debt will be cleared in approximately 11 years.
Conclusion
- The annual installments of Rs. 1,000 effectively reduce the principal over time.
- The compounded interest gradually decreases, leading to the debt being fully repaid after 11 years.
The company has borrowed Rs. 10,000 and needs to repay it with compound interest at a rate of 5% per annum through annual installments of Rs. 1,000.
Calculating Compound Interest
- Principal Amount (P): Rs. 10,000
- Rate of Interest (R): 5% per annum
- Installment Amount (I): Rs. 1,000
Calculation Steps
1. First Year Payment:
- Interest for the first year = 10,000 * 5% = Rs. 500
- Total amount after interest = 10,000 + 500 = Rs. 10,500
- After paying Rs. 1,000, remaining debt = 10,500 - 1,000 = Rs. 9,500
2. Second Year Payment:
- Interest for the second year = 9,500 * 5% = Rs. 475
- Total amount after interest = 9,500 + 475 = Rs. 9,975
- After paying Rs. 1,000, remaining debt = 9,975 - 1,000 = Rs. 8,975
3. Subsequent Years:
- Repeat the process of calculating interest on the remaining balance, adding it to the principal, and subtracting the installment.
Continuing the Process
- This process continues until the remaining debt is cleared.
- Each year, the interest amount decreases as the principal decreases, allowing more of the installment to go towards reducing the principal.
Final Calculation
Upon repeating the above steps, you will find that the debt will be cleared in approximately 11 years.
Conclusion
- The annual installments of Rs. 1,000 effectively reduce the principal over time.
- The compounded interest gradually decreases, leading to the debt being fully repaid after 11 years.
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A company borrowed rs. 10000 on condition to repay it with compound interest at 5% p.a. by annual installment of rs.1000 each. The number of years by which the debt will be clear is?
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A company borrowed rs. 10000 on condition to repay it with compound interest at 5% p.a. by annual installment of rs.1000 each. The number of years by which the debt will be clear is? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A company borrowed rs. 10000 on condition to repay it with compound interest at 5% p.a. by annual installment of rs.1000 each. The number of years by which the debt will be clear is? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A company borrowed rs. 10000 on condition to repay it with compound interest at 5% p.a. by annual installment of rs.1000 each. The number of years by which the debt will be clear is?.
A company borrowed rs. 10000 on condition to repay it with compound interest at 5% p.a. by annual installment of rs.1000 each. The number of years by which the debt will be clear is? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A company borrowed rs. 10000 on condition to repay it with compound interest at 5% p.a. by annual installment of rs.1000 each. The number of years by which the debt will be clear is? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A company borrowed rs. 10000 on condition to repay it with compound interest at 5% p.a. by annual installment of rs.1000 each. The number of years by which the debt will be clear is?.
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