CA Foundation Exam > CA Foundation Questions > A company borrows Rs. 10000 on condition to r...
Start Learning for Free
A company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear is
- a)14.2 yrs.
- b)10 yrs.
- c)12 yrs.
- d)none of these
Correct answer is option 'A'. Can you explain this answer?
Verified Answer
A company borrows Rs. 10000 on condition to repay it with compound int...
Amount (A) = P(1 + r/n)(nt)
Where:
P = Principal loan amount
r = Interest rate per period
n = Number of times interest is compounded per year
t = Time in years
In this case, the company repays in installments, and the loan has compound interest of 5% annually. The loan is Rs. 10,000, and the annual installment is Rs. 1000. We need to calculate how many years it will take for the debt to be cleared.
r = Interest rate per period
n = Number of times interest is compounded per year
t = Time in years
In this case, the company repays in installments, and the loan has compound interest of 5% annually. The loan is Rs. 10,000, and the annual installment is Rs. 1000. We need to calculate how many years it will take for the debt to be cleared.
First, note that:
Principal (P) = 10,000
Rate of interest (r) = 5% per year (0.05)
Installment per year = Rs. 1000
We need to find the number of years (t).
To solve this, we can use the formula for calculating the loan repayment with compound interest and annual installments. The calculation will require trial and error or a financial calculator, but we know from standard compound interest tables or using a financial calculator, that the number of years required to repay the loan with these parameters is approximately 14.2 years.
Rate of interest (r) = 5% per year (0.05)
Installment per year = Rs. 1000
We need to find the number of years (t).
To solve this, we can use the formula for calculating the loan repayment with compound interest and annual installments. The calculation will require trial and error or a financial calculator, but we know from standard compound interest tables or using a financial calculator, that the number of years required to repay the loan with these parameters is approximately 14.2 years.
Thus, the correct answer is A: 14.2 yrs.
Most Upvoted Answer
A company borrows Rs. 10000 on condition to repay it with compound int...
solutions
Present value of annuity regular
pv=A* [((1+I)^n -1)/(I*(1+I)^n]
10000=1000* [((1+0.05)^n -1)/(0.05*(1+0.05)^n]
(1.05)^n-0.5*(1.05)^n=1
(1.05)^n=2
Taking log both sides
n=log2/log 1.05r
Answer n= 14.2 years
Free Test
FREE
| Start Free Test |
Community Answer
A company borrows Rs. 10000 on condition to repay it with compound int...
Given:
Principal (P) = Rs. 10000
Rate of interest (R) = 5% p.a
Annual installment (A) = Rs. 1000
To find: Number of years it will take to clear the debt
Formula used:
Compound Interest formula:
A = P (1 + R/100)ⁿ
where,
A = Final amount
P = Principal
R = Rate of interest
n = Number of years
Calculations:
Let the number of years be 'n'
After 1st year:
Amount = Principal + Interest - Installment
= 10000 + (5/100)*10000 - 1000
= 4600
After 2nd year:
Amount = Previous amount + Interest - Installment
= 4600 + (5/100)*4600 - 1000
= 4260
Similarly, we can calculate the amount for the 3rd year, 4th year, and so on.
We need to find the value of 'n' such that the amount becomes zero.
After n years:
Amount = 0
P (1 + R/100)ⁿ = A * ((1 + R/100)ⁿ - 1) * (100/R)
10000 * (1 + 5/100)ⁿ = 1000 * ((1 + 5/100)ⁿ - 1) * (100/5)
20 (1.05)ⁿ = (1.05ⁿ - 1)
Dividing both sides by 20, we get:
(1.05)ⁿ/20 = (1.05ⁿ - 1)/20
Using trial and error method, we can find that n = 14.2 years approximately.
Therefore, the number of years it will take to clear the debt is approximately 14.2 years.
Hence, the correct option is (a) 14.2 years.
Principal (P) = Rs. 10000
Rate of interest (R) = 5% p.a
Annual installment (A) = Rs. 1000
To find: Number of years it will take to clear the debt
Formula used:
Compound Interest formula:
A = P (1 + R/100)ⁿ
where,
A = Final amount
P = Principal
R = Rate of interest
n = Number of years
Calculations:
Let the number of years be 'n'
After 1st year:
Amount = Principal + Interest - Installment
= 10000 + (5/100)*10000 - 1000
= 4600
After 2nd year:
Amount = Previous amount + Interest - Installment
= 4600 + (5/100)*4600 - 1000
= 4260
Similarly, we can calculate the amount for the 3rd year, 4th year, and so on.
We need to find the value of 'n' such that the amount becomes zero.
After n years:
Amount = 0
P (1 + R/100)ⁿ = A * ((1 + R/100)ⁿ - 1) * (100/R)
10000 * (1 + 5/100)ⁿ = 1000 * ((1 + 5/100)ⁿ - 1) * (100/5)
20 (1.05)ⁿ = (1.05ⁿ - 1)
Dividing both sides by 20, we get:
(1.05)ⁿ/20 = (1.05ⁿ - 1)/20
Using trial and error method, we can find that n = 14.2 years approximately.
Therefore, the number of years it will take to clear the debt is approximately 14.2 years.
Hence, the correct option is (a) 14.2 years.
|
Explore Courses for CA Foundation exam
|
|
Similar CA Foundation Doubts
Top Courses for CA FoundationView all
A company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer?
Question Description
A company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer?.
A company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer?.
Solutions for A company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer? in English & in Hindi are available as part of our courses for CA Foundation.
Download more important topics, notes, lectures and mock test series for CA Foundation Exam by signing up for free.
Here you can find the meaning of A company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
A company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer?, a detailed solution for A company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer? has been provided alongside types of A company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice A company borrows Rs. 10000 on condition to repay it with compound interest at 5% p.a by annual installments of Rs. 1000 each. The number of years by which the debt will be clear isa)14.2 yrs.b)10 yrs.c)12 yrs.d)none of theseCorrect answer is option 'A'. Can you explain this answer? tests, examples and also practice CA Foundation tests.
|
|
Explore Courses for CA Foundation exam
|
|
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup