Question

A man borrows INR 20000 for the house maintenance which is given by him in 2 years at 10% per annum. What is the total amount paid by him after 2 years?
(a) INR 21000
(b) INR 22000
(c) INR 24000
(d) INR 4000

Answer 1

Hint: Assume principal amount be Rs. 20000, rate equal to 10% and time be 2 years. Calculate simple interest by using, $S.I.=\dfrac{P\times R\times T}{100}$ and add the obtained amount to the principal amount to get the answer.

Complete step by step answer:
Simple interest is a quick and easy method of calculating the interest charge on a loan. Simple interest is determined by multiplying the daily interest rate by the principal by the number of days that elapse between payments. Simple interest is typically used when calculating interest on a loan. Unfortunately, borrowing money is not free. As a borrower from a financial institution, you are not only required to return the full borrowed amount, the principal, but pay the cost of borrowing interest.
Now, we come to the question. We have been provided with the principal amount = Rs. 20000, rate = 10% and time = 2 years.
$\begin{align}
  & \therefore S.I.=\dfrac{P\times R\times T}{100} \\
 & =\dfrac{20000\times 10\times 2}{100} \\
 & =4000 \\
\end{align}$
Hence, total interest after 2 years = Rs. 4000
Therefore, the total amount he has to pay after 2 years is Rs. (20000+4000) =Rs. 24000.
Hence, option (c) is the correct answer.

Note: One may get confused as to apply which interest formula, simple interest or compound interest. Simple interest is based on the principal amount of a loan or deposit. In contrast, compound interest is based on the principal amount and the interest that accumulates on it in every period. So, here we have to apply simple interest