Mr. Agrasen borrows ₹1,50,000 from a bank at a compound interest rate of 12% per annum, compounded annually. If he repays the loan after 3 years, what is the total amount he will have to repay?
Question
Mr. Agrasen borrows ₹1,50,000 from a bank at a compound interest rate of 12% per annum, compounded annually. If he repays the loan after 3 years, what is the total amount he will have to repay?
Solution
To calculate the total amount Mr. Agrasen will have to repay, we need to use the formula for compound interest, which is:
A = P (1 + r/n)^(nt)
Where: A = the amount of money accumulated after n years, including interest. P = principal amount (the initial amount of money) r = annual interest rate (in decimal) n = number of times that interest is compounded per year t = time the money is invested for in years
In this case: P = ₹1,50,000 r = 12% or 0.12 (in decimal) n = 1 (since it is compounded annually) t = 3 years
Substituting these values into the formula, we get:
A = ₹1,50,000 (1 + 0.12/1)^(1*3) A = ₹1,50,000 (1 + 0.12)^3 A = ₹1,50,000 * 1.12^3 A = ₹1,50,000 * 1.404928 A = ₹2,10,739.2
So, Mr. Agrasen will have to repay approximately ₹2,10,739.2 after 3 years.
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