Question

Anand obtained a loan of 7125000 from the Allahabad Bank for buying computers. The bank charges compound interest at 8% per annum, compounded annually. What amount will he have to pay after 3 years to clear the debt?

Answer 1

Hint: Now, to find the total amount Anand has to pay back, one should use formula \[L = B{\left( {1 + \dfrac{r}{{100}}} \right)^n}\], here, the L is total loan the borrower has to pay after n years, B is the amount borrower borrowed, r is the rate of interest and n is the number of years.

Complete step-by-step answer:
In the question, we are told that Anand obtained a loan of Rs.7125000 for buying computers. The bank from which he obtained the loan, charges a compound interest of 8% per annum, which will be compounded annually. Now, from this, we will have to find the total loan amount he has to pay after three years.
So, the amount he borrowed was Rs.7125000 and the rate of interest was 8% and time is three years, so, we can find it using formula,
\[L = B{\left( {1 + \dfrac{r}{{100}}} \right)^n}\]
Here, L is a total loan after n years the borrower has to pay, B is the amount the borrower borrowed, r is the rate of interest and n is the number of years.
The value of B is Rs.7125000, r is 8% and n is 3 years as given in the question, so, we will substitute it in the formula to find value of L which is asked.
So, on substituting we get,
\[L = 7125000{\left( {1 + \dfrac{8}{{100}}} \right)^3}\]
Now, on further doing calculations we get,
\[L = 7125000{\left( {\dfrac{{108}}{{100}}} \right)^3}\]
Or we can write it as,
\[L = 7125000 \times \dfrac{{108}}{{100}} \times \dfrac{{108}}{{100}} \times \dfrac{{108}}{{100}}\]
Now, doing further calculations like multiplying and dividing, we get,
\[L = 8975448\]
Hence, we can say that, the loan amount is Rs.8975448
Thus, Anand has to pay Rs.8975448 loan to the bank after three years.

Note: If someone gets some loan, then he or she has to repay it also a certain amount which is also known as compound interest which is calculated by subtracting the amount the borrower borrowed from the amount he or she repaid.