Step 1: Calculate the compound interest for the first year. The formula for compound interest is A = P(1 + r/n)^(nt), where P is the principal amount (Rs. 4000), r is the annual interest rate (7.5% or 0.075), n is the number of times that interest is compounded per year (1), and t is the time the money is invested for in years (1).

Step 2: Subtract the payment made at the end of the first year (Rs. 1500) from the total amount owed after the first year (principal + interest).

Step 3: Repeat steps 1 and 2 for the second year, using the amount owed after the first year as the new principal amount.

Step 4: The amount still owed to the bank after 2 such annual payments is the result from step 3.

Let's calculate:

Step 1: A = 4000(1 + 0.075/1)^(1*1) = Rs. 4300

Step 2: 4300 - 1500 = Rs. 2800

Step 3: A = 2800(1 + 0.075/1)^(1*1) = Rs. 3010

Step 4: 3010 - 1500 = Rs. 1510

So, the man still owes Rs. 1510 to the bank after 2 such annual payments. The correct answer is Rs. 1510.

Question

Step 1: Calculate the compound interest for the first year. The formula for compound interest is A = P(1 + r/n)^(nt), where P is the principal amount (Rs. 4000), r is the annual interest rate (7.5% or 0.075), n is the number of times that interest is compounded per year (1), and t is the time the money is invested for in years (1).

Step 2: Subtract the payment made at the end of the first year (Rs. 1500) from the total amount owed after the first year (principal + interest).

Step 3: Repeat steps 1 and 2 for the second year, using the amount owed after the first year as the new principal amount.

Step 4: The amount still owed to the bank after 2 such annual payments is the result from step 3.

Let's calculate:

Step 1: A = 4000(1 + 0.075/1)^(1*1) = Rs. 4300

Step 2: 4300 - 1500 = Rs. 2800

Step 3: A = 2800(1 + 0.075/1)^(1*1) = Rs. 3010

Step 4: 3010 - 1500 = Rs. 1510

So, the man still owes Rs. 1510 to the bank after 2 such annual payments. The correct answer is Rs. 1510.

Knowee AI · Accepted Answer