Mr. Gupta borrows ₹2,00,000 from a bank at a compound interest rate of 10% per annum, compounded annually. If he repays the loan after 5 years, what is the total interest he will have to pay?₹1,22,102₹1,84,340₹2,43,000₹2,34,065
Question
Mr. Gupta borrows ₹2,00,000 from a bank at a compound interest rate of 10% per annum, compounded annually. If he repays the loan after 5 years, what is the total interest he will have to pay?₹1,22,102₹1,84,340₹2,43,000₹2,34,065
Solution
To calculate the compound interest, we can use the formula:
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
Given in the problem: P = ₹2,00,000 r = 10% or 0.10 n = 1 (since it is compounded annually) t = 5 years
Substituting these values into the formula:
A = ₹2,00,000 (1 + 0.10/1) ^ (1*5) A = ₹2,00,000 (1.10) ^ 5 A = ₹2,00,000 * 1.61051 A = ₹3,22,102
The total amount after 5 years is ₹3,22,102.
To find the total interest paid, we subtract the principal from the total amount:
Interest = A - P Interest = ₹3,22,102 - ₹2,00,000 Interest = ₹1,22,102
So, Mr. Gupta will have to pay ₹1,22,102 in interest.
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