Question

Arun took a loan of Rs. 390625 from Kuber Finance. If the company charges interest at 16% per annum, compounded quarterly, what amount will discharge his debt after one year?

Answer 1

Present value, P = Rs.390625 

Interest rate, R = 16% per annum 

Time, n = 1 year 

∵ Compounded quarterly, 

∴ Amount (A) = P [1 + (R/4)/100]⁴ⁿ [Where, P = Present value 

R = Annual interest rate 

n = Time in years] 

∴ A = 390625 [1 + (16/4)/100]⁴ 

⇒ A = 390625 [1 + 4/100]⁴ 

⇒ A = 390625 [1 + 1/25]⁴ 

⇒ A = 390625 [26/25]⁴ 

⇒ A = 390625 × 26/25 × 26/25 × 26/25 × 26/25 

⇒ A = 390625 × 456976/390625 

⇒ A = 1 × 456976 

⇒ A = 456976 

∴ Amount = Rs.456976 

∴ Arun has to pay Rs.45976 after 1 year.