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Ravi borrows Rs. 50,000 from a bank at 22.5% p.a. simple interest and clears the debt in three years. If the installments paid at the end of the first, and second year to clear the debt are Rs. 20,000, and Rs. 30,000 respectively, what amount should be paid at the end of the third year to clear the debt?

Ravi borrows Rs. 50,000 from a bank at 22.5% p.a. simple interest and clears the debt in three years. If the installments paid at the end of the first, and second year to clear the debt are Rs. 20,000, and Rs. 30,000 respectively, what amount should be paid at the end of the third year to clear the debt? Correct Answer 18,000

Given:

Money borrowed by ram = Rs. 50,000

Rate of interest = 22.5%

Installment paid in first year = Rs. 20,000

Installment paid in second year = Rs. 30,000

Concept used:

1.) In this type of question of installment in Simple interest, the installment amount will always be reduced from principal and the interest will be calculated on the remaining principal.

2.) Interest = (P × R × T)/100

→ P = Principal amount

→ R = Rate of interest

→ T = Time period

Calculations:

Principal for first year = 50,000

Simple interest for the first year = (P × R × T)/100

⇒ (50000 × 22.5 × 1)/100 = 11,250

Remaining amount after first installment is paid = 50000 – 20000 = 30,000

Principal for second year = 30,000

Simple interest for the second year = (P × R × T)/100

⇒ (30000 × 22.5 × 1)/100 = 6,750

Amount after second installment is paid = 30,000 – 30,000 = 0

∴ Amount which has to pay in third year by Ram = Total simple interest in two years

⇒ 11,250 + 6,750 = 18,000

∴ Amount which has to pay in third year by Ram = 18,000

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