INTEREST & ANNUITY

1) Find the Simple Interest on Rs. 1,25,000/- @ 8% p.a. for 5 years?

(Ans: Rs. 50,000/-).

GIVEN:

Principal = P = Rs. 1,25,000/-

Rate of Interest = i = 8% = 8/100 = 0.08
Number of Year = n = 5 years

SOLUTION:
Simple Interest = P x n x i

= 125000 x 5 x 0.08
=====> S I = Rs. 50,000/-

---------------------
2) An amount of Rs. 2,300/- was borrowed by Ankit, at a simple interest of 12 % p.a. He
returned the amount with interest, after 3 years. Calculate the total amount, including
the simple interest he had to repay. (Ans: Rs. 3,128/-)

GIVEN:
P = Rs. 2,300/-

i = 0.12
n = 3 years

SOLUTION:
SI=Pxnxi
= 2300 x 0.12 x 3

=====> S I = Rs. 828/-

Thus, Total Amount = A = P + S I

= 2300 + 828
=====> A = Rs. 3,128/-

***********
 3) A sum of Rs. 10.000/- was taken as a loan by Atul at a Simple Interest of 14% p.a.
Find the total amount with interest to be returned by him after 1 ½ years?
(Ans: Rs. 12,100/-)

Practise Problem
4) A sum of Rs. 25,000/- accumulated to Rs. 55,000/- after 12 years. Find the rate of
simple interest p.a. (Ans: 10%)
GIVEN:
P = Rs. 25,000/-
A = Rs. 55,000/-

n = 12 years
SOLUTION:

SI=A-P
= 55000 - 25000
======> S I = Rs. 30,000/-

Thus, S I = P x n x i
=====> 30000 = 25000 x 12 x i

=====> i = 30000 / 300000

=====> i = 0.10

======> r% = 10%
****************

5) A sum of Rs. 6,400 accumulated to Rs. 9,280/- in a certain period. If the rate of
interest is 9%, find the period? (Ans: 5 years)

Practise Problem
6) An amount of Rs. 35,000/- resulted into Rs. 52,500/- after a certain period, at 10%
p.a. Rate of simple interest. Find the period? (Ans: 5 years)
Problem Problem
7) ​ imple Interest o
S ​ n a certain amount of money for 4 years at 8% p.a. ​is less than the
Simple Interest on the same amount for 5 ½ years @ 7% p.a. ​by Rs. 585/​-. Find the
Principal Amount? (Ans: Rs. 9,000/-).

GIVEN:
n​1​ = 4 years

i​1​ = 0.08
n​2​ = 5 ½ years = 11/2 years = 5.5 years

i​2​ = 0.07
SI​1​ is less than SI​2​ by Rs. 585/- ====> SI​2​ - SI​1​ = 585

SOLUTION:
SI​1 =
​ P x n​1​ x i​1

= P x 4 x 0.08
====> SI​1 ​= 0.32P

Similarly, SI​2​ = P x n​2​ x i​2

= P x 5.5 x 0.07
======> SI​2 ​= 0.385P

Given: SI​2 ​- SI​1 ​= 585

====> 0.385P - 0.32P = 585

=====> 0.065P = 585

====> P = 585 / 0.065

=====> P = Rs. 9,000/-

*****************

8) If the Simple Interest on a certain amount of money for 3 years at 10% p.a. is less
than the Simple Interest on the same amount for 4 ½ years @ 9% p.a. by Rs. 1,260/-.
Find the Principal Amount? (Ans: Rs. 12,000/-).
Practise Problem
9) Anu kept a certain amount in a bank, giving simple interest at 8% p.a. for 5 years and
got a simple interest of Rs. 10,000/-. Her friend Disha, also kept an identical amount in
another bank for 3½ years, giving simple interest at 11% p.a. Calculate the interest Disha
will get? (Ans: Rs. 9,625/-)
GIVEN:

i​A​ = 0.08
n​A​ = 5 years

SI​A =
​ Rs. 10,000/-

n​D​ = 3 ½ years = 7/2 years = 3.5 years

i​D​ = 0.11
P​A​ = P​D

SOLUTION:
SI​A​ = P​A​ x n​A​ x i​A

===> 10000 = P​A​ x 5 x 0.08

====> 10000 = P​A​ x 0.40
====> P​A​ = Rs. 25,000/-

Given: P​A​ = P​D ​= RS. 25,000/-

=====> SI​D​ = P​D​ x n​D​ x i​D

=====> = 25000 x 3.5 x 0.11

=====> SI​D​ = Rs. 9,625/-

*************
10) Ajit and Akshay kept exactly identical amounts in two different banks giving simple
interest at 9% and 10% respectively. Ajit got interest of Rs. 4,050 after 2 ½ years while
Akshay kept his money in the other bank for 4 ½ years. Calculate the simple interest he
will receive? (Ans: Rs. 8,100/-).
Practise Problem
11) John borrowed Rs. 80,000/- from his friend, partly at 10% p.a. and the remaining at
12% p.a. After 4 years, he returned the total amount with a total simple interest of
Rs. 34,400/-, find the amounts he borrowed at each of these rates?
(Ans: Rs. 50,000/- & Rs. 30,000/-).
GIVEN:

P = Rs. 80,000/- partly

i​1​ = 0.10

i​2​ = 0.12
n = 4 years

Total Simple Interest = Rs. 34,400/-

SOLUTION:

Let the Principal part borrowed @ 10% be Rs. P/-

Thus, the Principal part borrowed @ 12% will be Rs. (80000 - P)/-

Thus, SI​1​ = P x n x i​1

====> SI​1​ = P x 4 x 0.10
=====> SI​1​ = 0.40P

Similarly,
SI​2​ = P x n x i​2

=====> SI​2​ = (80000 - P) x 4 x 0.12

======> SI​2​ = (80000 - P) x 0.48

=======> SI​2​ = 38400 - 0.48P

WKT, Total Simple Interest = SI​1​ + SI​2

=====> TSI = 0.40P + 38400 - 0.48P

But Given: TSI = Rs. 34,400/-

======> 34400 = 38400 - 0.08P

======> 34400 - 38400 = -0.08P

=======> P = 4000 / 0.08

=====> P = Rs. 50,000/-
 Therefore, Principal borrowed @ 10% = Rs. 50,000/-

And Principal borrowed @ 12% = 80000 - 50000

= Rs. 30,000/-

*************
12) Mr. Khan borrowed Rs. 60,000/- partly at 9% p.a. and the remaining at 10% p.a.
After 3 years, he returned the total amount with the total simple interest of Rs. 16,800/-.
Find the amounts he borrowed at each of these rates? (Ans: Rs. 40,000/- & Rs. 20,000)

Practise Problem
13) Calculate the Compound Interest on Rs. 20,000/- for 4 years at 8% p.a.?
(Ans: Rs. 7,209.78/-)
GIVEN:

P = Rs. 20,000/-
n = 4 years

i = 0.08
SOLUTION:
CI = A - P

But, A = P(1 + i)​n

====> A = 20000(1 + 0.08)​4

=====> A = 20000(1.08)​4
=====> A = Rs. 27,209.78/-

=====> CI = A - P
= 27209.78 - 20000

=====> CI = Rs. 7,209.78/-

*************
14) Find the amount accumulated after 6 years if a sum of Rs. 25,000/- is kept in a fixed
deposit at a compound interest of 9% p.a. (Ans: Rs. 41,927.50/-).
GIVEN:

P = Rs. 25,000/-
n = 6 years

i = 0.09
SOLUTION:

A = P(1 + i)​n
====> A = 25000(1 + 0.09)​6

=====> A = 25000(1.09)​6
=====> A = Rs. 41,927.50/-

*************
15) The accumulated amounts for a certain Principal, with Compound Interest at a
certain rate in 2 years and in 4 years are respectively Rs. 2,662/- and Rs. 3,221.02/-.
Find the Principal and the rate of interest? (Ans: Rs. 2,200/- & 10%)
GIVEN:

n​1​ = 2 years ; n​2​ = 4 years

A​1​ = Rs. 2,662/- and A​2​ = Rs. 3,221.02/-

SOLUTION
A​1 ​= P(1 + i)​n1

====> 2662 = P(1 + i)​2​ ------------- (1)

Similarly, A​2 ​= P(1 + i)​n2

===========> 3221.02 = P(1 + i)​4​ ----------- (2)

Comparing (1) & (2) using Componendo - Dividendo

​ ​(1 + i)​4
====> (2) / (1) ----> 3​221.02​ = P
2662 = ​P(​ 1 + i)​2

============> 1.21 = (1 + i)​2

 =============> 1 + i = √1.21

==============> 1 + i = 1.1
====> i = 1.1 - 1

=====> i = 0.1
=======> r% = 10%

Substituting i = 0.1 in (1)

=====> P(1 + i)​2 ​= 2662

======> P(1.1)2 = 2662

=======> P = 2662 / 1.21

========> Principal (P) = Rs. 2,200/-

***********

16) The Simple and Compound Interest for 2 years, on the same Principal, at the same
rate are Rs. 7,200/- and Rs. 7,632/- respectively. Find the Principal and the rate of
interest? (Ans: Rs. 30,000/- & 12%).
GIVEN:
SI = Rs. 7,200/- ; CI = Rs. 7,632/-

n = 2 years
SOLUTION:

SI = P x n x i
===> 7200 = P x 2 x i

====> 7200 = 2iP ------ (1)

Similarly, CI = ​A​ - P

=====> 7632 = ​P(1 + i)​n​ - P [ Since A = P(1 + i)​n​]

=====> 7632 = P(1 + i)​2​ - P

=====> 7632 = P[(1 + i)​2 ​- 1]

========> 7632 = P[1 + i​2​ + 2i) - 1] [Since (1 + i)​2​ = (a + b)​2​]

===========> 7632 = P(​1​ + i​2​ + 2i ​- 1​)

===========> 7632 = P(i​2​ + 2i)
 ===========> 7632 = iP(i + 2) -------------(2)
Comparing (1) & (2) by Componendo - Dividendo

===> (2) / (1) ---> ​iP​(i + 2)​ = ​7632

2​iP​ 7200

====> ​i + 2​ = 1.06
2

====> i + 2 = 2 x 1.06
====> i + 2 = 2.12

====> i = 2.12 - 2
====> i = 0.12

====> r% = 12%
Substituting i = 0.12 in (1)

===> 2iP = 7200

====> 2(0.12) P = 7200
=====> 0.24 P = 7200

=====> P = Rs. 30,000/-

************

17) Jay kept Rs. 20,000/- for 4 years in a bank as a fixed deposit. At time of maturity he
received a total amount of Rs. 27,210/- with compound interest. Find the rate of
interest? (Ans: 8%).
GIVEN:

P = Rs. 20,000/- ; n = 4 years ; A = Rs. 27,210/-

SOLUTION:

A = P(1 + i)​n
===> 27210 = 20000 (1 + i) 4​

=====> 1.3605 = (1 + i)​4

======> 1 + i) = ​4​√ 1.3605
 ======> 1 + i = 1.08

=====> i = 1.08 - 1
====> i = 0.08

====r% = 8%
**********

18) The difference between Simple and Compound Interest on a certain Principal for 2
years at 6% rate of interest p.a. is Rs. 13.50/-, find the Principal. (Ans: Rs. 3,750/-)

GIVEN:
CI - SI = Rs. 13.50/-

n = 2 years
i = 0.06

SOLUTION:
CI = A - P

⇒ CI = P(1 + i)​n​ - P
===> CI = P[(1 + i)​n​ -1]
====> CI = P[(1 + 0.06)​2​ - 1]

====> CI = P[(1.06)​2​ - 1]
====> CI = P[1.1236 - 1]

====> CI = 0.1236P ----------- (1)

Similarly, SI = P x n x i

====> SI = P x 2 x 0.06
====> SI = 0.12P ----------(2)

Given: CI - SI = Rs. 13.50/-

=======> 0.1236P - 0.12P = 13.50

=========> 0.0036P = 13.50

======> P = 13.50 / 0.0036

=======> P = Rs. Rs. 3,750/-

 **********

19) Juhi kept Rs. 30,000/- as a fixed deposit in a bank for 2 years. She received
Rs. 34,347/- at the time of maturity. Calculate rate of interest p.a. compounded
annually. (Ans: 7%)
Practise problem

20) Find the total amount, with interest, if a sum of Rs. 8,000/- is kept in a bank for 3
years with 12% p.a., compounded half yearly? (Ans: Rs. 11,348.15/-)

GIVEN:
P = Rs. 8,000/-

n = 3 years
i = 0.12 --- Compounded Half Yearly

SOLUTION:
A = P(1 + i/2)​2n

====> A = 8000 ( 1 + 0.12/2)​2 x 3

====> A = 8000(1 + 0.06)​6
====> A = 8000(1.06)​6

=====> A = Rs. 11,348.15/-

***********

21) The difference between simple interest and compound interest on a sum for 4 years at
10% p.a. is Rs. 1,025.60/-. Find the sum? (Ans: Rs. 16,000/-)

Practise problem (Similar to 18th problem)

22) A car was bought at Rs. 5,40,000/-. Find its resale price after 3 years by considering
8% depreciation p.a.? (Ans: 4,20,491.52/-).
GIVEN:

P = Rs. 5,40,000/-
n = 3 years

i = 0.08 ---- Depreciation

SOLUTION:
 DV = P(1 - i)​n

===> DV = 540000(1 - 0.08)​3

====> DV = 540000(0.92)​3

====> DV = Rs. 4,20,491.52/-

*************

23) An equipment was purchased at Rs. 10,50,000/-. Find its market price after 5 years
by taking into account 8% depreciation p.a.? (Ans: Rs. 6,92,035.59/-)

Practise Problem
24) An LCD TV was bought at Rs. 40,500/-, 3 years back. Find its current market price
by considering 6% depreciation p.a.? (Ans: 33,638.65/-)
Practise Problem

25) An equipment was purchased at Rs. 10,00,000/-. Find its depreciated value for 5
years by considering 8% depreciation for each year?
(Ans: 9,20,000/-; Rs. 8,46,400/-; Rs. 7,78,688/-; Rs. 7,16,392.96/-; Rs. 6,59,081.52/-).
GIVEN:
P = Rs. 10,00,000/-

n = 5 years ; n1 = 1year; n2 = 1year, n3 = 1 year, n4 = 1 year, n5 = 1 year

i = 0.08

SOLUTION
DV​1​ = P(1- i)​n1

= 1000000( 1 - 0.08)​1
= 1000000(0.92)1

DV​1​ = Rs. 9,20,000/-

For the Second Year DV​1​ = P​2​ = Rs. 9,20,000/-

DV​2​ = P​2 (1
​ - i)​n2
​ 1
DV​2 =
​ 920000(0.92)​

DV​2​ = Rs. 8,46,400

For the Third Year DV​2​ = P​3​ = Rs. 8,46,400/-
DV​3​ = P​3​(1 - i)​n3
 DV​3​ = 846,400(0.92)1

===> DV3 = Rs. 7,78,688/-

For the Fourth Year DV​3​ = P​4​ = Rs. 7,78,688/-

DV​4​ = P​4​(1 - i)​n4

= 778688(0.92)​1

DV​4 =
​ Rs. 7,16,392.96/-

For the Final Year DV​4​ = P​5​ = Rs. 7,16,392.96/-

n5
DV​5 =
​ P​5​(1 - i)​

= 716392.96(0.92)​1

====> DV​5​ = RS. 6,59,081.52/-

**************

26) An office furniture set was purchased for Rs. 6,00,000/-. Find its depreciated value
for 4 years by considering 6% depreciation p.a. for each year?
(Ans: Rs. 5,64,000/-; Rs.5,30,160/-; Rs. 4,98,350.40/-; Rs. 4,68,449.38/-).
Practise Problem
27) A car was purchased at a certain price. Its value after 1 year was Rs. 3,12,800/- with
a certain rate of depreciation. Further, its value decreased to Rs. 2,87,776/- after 2 years.
Find the original price of the car and the rate of depreciation p.a.?
(Ans: Rs. 3,40,000/-; 8%)
GIVEN:

DV​1​ = Rs. 3,12,800/- n​1​ = 1 year

DV​2 ​= Rs. 2,87,776/- n​2​ = 2 year

SOLUTION:
DV​1​ = P(1 - i)​n1

===> 312800 = P(1 - i)​1 ​------------------- (1)

Also, DV​2​ = P(1 - i)​n2

===> 287776 = P(1 - i)​2 ​------------------------(2)

 Comparing (1) & (2) using Componendo - Dividendo Method

(2) / (1) ------> ​P(​1 - i)​2​ ​= ​287776

​P(1 - i)​1​ = 312800

=========> 1 - i = 0.92
=============> -i = 0.92 - 1

=================> i = 0.08
=====> r% = 8%

Substituting i = 0.08 in (1)

312800 = P1(1 - i)​1

===> P(1 - 0.08)​1​ = 312800

====> 0.92P = 312800

=====> P = 312800/0.92
=====> P = Rs. 3,40,000/-

************
28) A computer was bought at a certain price. Its value after 1 year was Rs. 45,000/-
after considering certain rate of depreciation. Further, its value decreased to Rs. 40,500/-
after 2 years at the same rate of depreciation. Find the original price of the computer and
the rate of depreciation p.a.? (Ans: Rs. 50,000/-; 10%)

Practise Problem
29) The machinery has a resale price of Rs. 49,572/-, after 3 years with 10% rate of
depreciation p.a. Find its original price? (Ans: Rs. 68,000/-).
GIVEN:

DV = Rs. 49,572/-
n = 3 years

i = 0.10
SOLUTION

DV = P(1 - i)​n
===>49572 = P( 1 - 0.10)​3
=====> 49572 = P(0.90)​3
 ====> P= 49572/0.729

=====>P = Rs. 68,000/-

**********

30) A car was purchased 3 years back. Its current resale price with 5 % depreciation is
Rs. 2,57,212.50/-. Find its original price? (Ans: Rs. 3,00,000/-).

Practise Problem
31) Find the accumulated value if Rs. 1,25,000/- were kept in a fixed deposit for 5 years
at 9% compound interest p.a.? (Rs. 1,92,327.99/-)
GIVEN:

P = Rs. 1,25,000/-
n = 5 years

i = 0.09
SOLUTION:

A (Future Value) = P(1 + i)​n

====> A = 125000(1 + 0.09)​5
====> A = 125000(1.09)​5

====> A = Rs. 1,92,327.99/-

**********

32) Find the future value of Rs. 24,500/- kept as a fixed deposit after 7 years at 7% p.a.
compound annually? (Rs. 39,341.65/-)

Practise Problem
33) Mrs. Khanna kept Rs. 55,000/- in a bank in fixed deposit for 3 years at 9% p.a. so as
to get a minimum of Rs. 70,000/- after 3 years. Check whether her requirement will be
fulfilled or not. (Ans: Rs. 71,226.60/-. Requirement is fulfilled with an excess amount of
Rs. 1,226.60/-)
GIVEN:

P = Rs. Rs. 55,000/-

N = 3 years
I = 0.09
 SOLUTION

FV (A) = P(1 + i)​n

= 55000(1 + 0.09)​3

= 55000(1.09)​3
====> FV = Rs. 71,226.60/-
Requirement is fulfilled with an additional amount os Rs. 1,226.60/-
**************

34) Mr. Mehta was approached by a person with two schemes, as he wanted to invest
Rs. 1,20,000/-. In scheme A, the period was 8 years with 9% rate p.a. compounded
annually. In scheme B, the period was 10 years with 8% compound interest p.a.? Advice
him about the choice of scheme w.r.t the amount to be received. (Scheme A - Amount
Rs. 2,39,107.53/-; Scheme B - Amount Rs. 2,59,071/- So choice is Scheme B).
GIVEN:

P = Rs. 1,20,000/-
nA = 8 years
iA = 0.09

nB = 10 years
iB = 0.08

SOLUTION
I) SCHEME A

FVA = P(1 + iA)nA

= 120000(1+0.09)8
=====> FVA = 120000(1.09)8
=====> FVA = Rs. 2,39107.53/-

II) SCHEME B
FVB = P( i + iB)nB

= 120000(1 + 0.08)10
= 120000(1.08)10
=========>FVB = Rs. Rs. 2,59,071/-

So Scheme B (Rs. 2,59,071/-) will be chosen over Scheme A (Rs. 2,39107.53/-)

 *****************

35) Find the present value at 5% rate of interest of Rs. 7,408.80 payable 3 years from
now? (Ans: Rs. 6,400/-)

GIVEN:
A = Rs. 7,408.80/-

N = 3 years
I = 0.05

SOLUTION
PV = ​ A ​ [Since WKT A = P(1 + i)​n​]

(1 + i)​n
======> PV = ​7408.80

(1 + 0.05)​3
======> PV = ​7408.80

(1.05)​3
========> PV = ​7408.80
1.1276

==========> PV = Rs. 6,400/-

*************

36) Sohail promised to pay Aamir Rs. 15,000/- after 3 years with compound rate of
interest 8% p.a. He also promised to pay Aakash Rs. 20,000/- after 4 years with
compound rate of interest 9% p.a. Find the present worths of these payments. Also find
the total present worth of the money Sohail has to pay.
(Ans: Rs. 11,907.48/-; Rs. 14,168.50/-; Rs. 26,075.99/-)
GIVEN:

AA = Rs. 15,000/-
nA = 3 years

iA = 0.08
AK = Rs. 20,000/-
nK = 4 years
 iK = 0.09

SOLUTION
i) PVA = A​A ​ = ​15000 ​ = ​15000​ = ​15000 ​ = Rs. 11,907.48/-

(1 + i​A​)​nA ​ (1 + 0.08)​3​ (1.08)​3​ 1.2597

ii) PVK =​ A​K​ ​ ​ = 20000 ​ =​ 20000 ​ = ​20000 ​ = Rs. 14,168.50/-

(1 + i​K​)​nK​ (1 + 0.09)​4​ (1.09)​4​ 1.1446

iii) PVS = PVA + PVK

= 11907.48 + 14168.50
===> PVS = Rs. 26,075.99/-

************
37) Salil will pay Shrikant Rs. 25,000/- after 2 years and he will pay Subhash
Rs. 32,000/- after 3 years. Find the total present worth of both the payments, if the
interest rate is 8% p.a. compounded annually. (Rs. 21,433.47/-; 25,402.63/-; 46,836.10/-)
Practise problem

38) Kamal deposits Rs. 5,000/- at the end of ​each year in a bank at 9% p.a. compound
interest. What will be the total amount she will receive after 6 years?
(Ans: Rs. 37,616.67/-)
GIVEN:

R © = Rs. 5,000/-
I = 0.09

N = 6 years
SOLUTION:

A = ​R[(1 + i)​n​ - 1]
i

====> A = ​5000[(1 + 0.09)​6​ - 1]

0.09
 =========> A = ​5000[(1.09)​6​ - 1]

0.09
==========> A = ​5000[1.67710 - 1]

0.09
=========> A = ​5000[0.67710]

0.09
=========> A = Rs. 37,616.67/-

***********
39) Nishant deposits Rs. 6,000/- at the end of ​every month in a bank giving 9%
compound interest p.a. Find the accumulated amount after one year?
(Ans: Rs. 75,037.60/-)

GIVEN:
R = Rs. 6,000/-

I = 0.09 - compounded monthly

N = 1 year

(6000 x 12 = T=RS. 72,000/-)

SOLUTION:

A = ​R[(1 + i/m)​mn​ - 1]
i/m

====> A = ​6000[(1 + 0.09/12) 12

​ x 1​ - 1]
0.09/12

=====> A = ​6000[(1 + 0.0075)​12​ - 1]

0.0075

======> A = ​6000[1.0075)​12​ - 1]
0.0075

======> A = ​6000[1.09381 - 1]
0.0075
 ======> A = 6000[0.09381]

0.0075
======> A = Rs. 75,037.60/-

******************
40) A person invests Rs. 5,000/- at the end of every year with a company which pays
interest at 10% p.a. H​e allows his deposits to accumulate with the company at compound
rate. Find the amount standing to his ​credit one year after he has made his investment
for the fourth time? (Ans: Rs. 25,525.50/-)
GIVEN:

R = Rs. 5,000/-
I = 0.10

N = 4 years
(5000 X 4 = 20000)

SOLUTION:
A = ​R[(1 + i)​n​ - 1]
I

====> A = 5000[(1 + 0.10)4 - 1]

0.10

=====> A = 5000[(1.1)4 - 1]
0.10

======> a = 5000[1.4641 - 1]
0.10

======> A = 5000[0.4641]
0.10

======> A = Rs. 23,205/-

Given: His deposits is accumulated with the company for one more year @ compound
rate:
A = P(1 + i)​1
===> A = 23205(1 + 0.10)1
 ====> A = 23205(1.1)

=====A = Rs. 25,525.50/-

*************

41) Amit invested Rs. 20,000/- at the end of every quarter at a compound interest of 6%
p.a. Find the amount standing to his credit one year after he has made his investment for
the fifth time? (Ans: Rs. 1,19,506.40/-)
GIVEN:

R = Rs. 20,000/-
i = 0.06 - Compounded quarterly

n (number of times) = 5
SOLUTION

A = ​R [ (1 + i)n - 1]
I

====> A = ​20000[(1 + 0.06)5 - 1]

0.06
=====> A = ​20000[(1.06)5 - 1]

0.06
=====> A = ​20000[1.33823 - 1]

0.06
======> A = ​20000[0.33823]

0.06
=======> A = Rs. 1,12,741.86/-

Given: Amount is kept standing to his credit for one more year
A = P(1 + i)​n

= 112741.86(1 + 0.06)1
= 112741.86(1.06)

===> A = Rs. 1,19,3.1.37/-

******************
42) Find the annuity at the end of each year for 10 years if its maturity value is
Rs. 1,05,292.40/- at compound interest of 12% p.a.? (Ans: Rs. 6,000/-.)

GIVEN:
A = Rs. 1,05,292.40/-

N = 10 years
I = 0.12

SOLUTION:
A = ​R [ (1 + i)​n​ - 1]

I
===> 105292.40 = ​R [(1 + 0.12)​10​ - 1]
0.12
=====> 105292.40 = ​R[(1.12)10 - 1]

0.12
======> 105292.40 = ​R[3.105848 - 1]
0.12

=====> 17.54874R = 105292.40

=====> R = Rs. 5999.99/-

=====> R = Rs. 6,000/-

**************

43) Find the annuity to be paid at the end of every month if the maturity value after 3
years @ 12% p.a. is Rs. 38,769.19/-? (Ans: Rs. 900/-)

GIVEN:

44) Mr. Shah deposited Rs. 12,000/- at the end of every year for 3 years. He received
interest at 8% per annum compounded half yearly. Find the accumulated amount after 3
years. Also state the effective rate? (Ans: Rs. 39,017.50/-; 8.16%)
GIVEN:
 R = Rs. 12,000/-

N = 3 years
I = 0.08

Rate of interest by the financial institution is compounded half yearly

SOLUTION

i) ACCUMULATED AMOUNT
A = ​R [ (1 + i)​n​ - 1]

I
=====> A = ​12000[(1 + 0.08)​3​ - 1]

0.08
=====A = Rs. 38,956.80/-

ii) EFFECTIVE / AFFECTIVE RATE OF INTEREST:

Given: Rate of interest by the financial institution is compounded ​half yearly

Here ​m = 2
I​e​ = (1 + i/m)​m​ - 1

====> i​e​ = ( 1 + 0.08/2)​2​ - 1

=====> i​e​ = (1 + 0.04)​2​ - 1

=====> i​e​ = (1.04)​2​ - 1

====> i​e​ = 1.0816 - 1

====> i​e​ = 0.0816

====> r​e​% = 8.16%

**************
45) Anu deposited Rs. 25,000/- at the end of every year for 4 years, with interest as 12%
p.a., compounded quarterly. Find the effective rate of interest and the accumulated value
after 3 years? (Ans: Rs. 84,820.72/-; 12.55%)

GIVEN:
R = Rs. 25,000/-
 N = 3 years

I = 0.12
Rate of interest by the financial institution is compounded quarterly

SOLUTION:
i) ACCUMULATED AMOUNT :

A = ​R [ (1 + i)​n​ - 1]
I

====> A = 25000[(1 + 0.12)3 - 1]

0.12

====> A = Rs. 84,360/-

ii) EFFECTIVE RATE OF INTEREST:

Given: Rate of interest by the financial institution is compounded ​quarterly

Here, m = ​4

Ie = (1 + i/m)​m​ - 1
= (1 + 0.12/4)​4​ - 1
= (1 + 0.03)4 - 1

====> i​e​ = (1.03)4 - 1

====> i​e​ = 0.1255

=====> r​e​% = 12.55%

******************

46) Ketan purchased a second hand motorbike with initial payment of Rs. 20,000/- and
six monthly instalments of Rs. 5,000/- each. If the seller wishes to get 12% compound
interest p.a., find the price of the bike? (Ans: Rs. 48,977.38/-)
GIVEN:

IP (DP) = Rs. 20,000/-

N = 6 monthly instalments

R = Rs. 5,000/-
I = 0.12
 SOLUTION:

PV = ​R[1 - V​n​]

I
Here ,the compounding nature is monthly. Thus i = 0.12 / 12

====> i = 0.01
Here, V = ​1 ​ = ​ 1 =1 =1 ​ = 0.9901

1+i 1 + 0.12/12 1 + 0.01 1.01

====> V​n​ = (0.9901)​6

====> V​n​ = 0.942051

====> PV = ​5000[ 1 - 0.942051]

0.01

====> PV = Rs. 28974.5/-

===> Total Price = IP + PV
= 20000 + 28974.50

=====> Total Price = Rs. 48974.50/-

***********

47) Mita purchased a refrigerator with a down payment of Rs. 2,500/- and the remaining
amount to be paid in 6 equal monthly instalments of Rs. 1,000/- each. Find the price of
the fridge if the company wants to earn 12% p.a.? (Ans: Rs. 8,290/-)
GIVEN:

DP = Rs. 2,500/-
N = 6 monthly instalments

R = Rs. 1,000/-
I = 0.12 =====> 0.12/12 = 0.01 (Since it is compounded monthly)
 SOLUTION:

PV = ​R[1 - V​n​]
i

V =​ 1 ​ = ​1 ​ =​ 1 ​ = 0.9901
1+i 1 + 0.01 1.01

===> V​n​ = (0.9901)​6​ = 0.942051

====> PV = ​1000[1 - 0.942051]

0.01
====> PV = Rs. 5,794.90

====> Total Price = DP + PV

= 2500 + 5794.90

====> Total Price = Rs. 8,294.90/=

**************
48) Ashutosh purchased Innova car with a down payment of Rs. 1,50,000/-and the
remaining amount to be paid in 10 equal quarterly instalments. If the company wants to
get 12% p.a., find the instalment amount, given that the price of the car is
Rs. 9,60,000/-? (Ans: Rs. 95,034/-)
GIVEN:

DP = Rs. 1,50,000/-
N = 10 equal quarterly instalments

I = 0.12 = 0.12 / 4 = 0.03

TP = Rs. 9,60,000/-

SOLUTION:
TP = DP + PV

===> 960000 = 150000 + PV

====> PV = Rs. 8,10,000/-
 ====> PV = ​R[1 - V​n​]

i
V =​ 1 ​ = ​1 ​ =​ 1 ​ = 0.9709

1+i 1 + 0.03 1.03

V​n ​= (0.9709)​10​ = 0.74429

=====> 810000 = ​R[1 - 0.74429]

0.03

====> 8.52367R = 810000

====> R = 810000 / 8.52367

=====> R = Rs. 95,029.53

*********************

49) Neha bought a washing machine by paying Rs. 6,000/- and the remaining amount in
4 equal quarterly instalments. If the price of the washing machine is Rs. 16,000/- and the
shopkeeper wants to earn 12% rate of interest, compounded annually, find the instalment
amount? (Ans: Rs. 2,693/-).
GIVEN:

DP = Rs. 6,000/-
N = 4 equal quarterly instalments

TP = Rs. 16,000/-
I = 0.12 / 4 = 0.03

SOLUTION
TP = DP + PV

Practise Problem
********
50) Radha purchases TV worth Rs. 5,000/- from a dealer at 8% p.a., reducing balance
interest rate. Find the EMI, if the repayments is to be made in 6 months?
(Ans: Rs. 852.89/-).

GIVEN:
PV (LA) = Rs. 5,000/-

I = 0.08 = RBM = 0.08 /12 = 0.0067

N = 6 instalments

SOLUTION:
PV (LA) = ​EMI [1 - V​n​]

i
V =​ 1 ​ = ​1 ​ = ​ 1 ​ = 0.993344

1+i 1 + 0.0067 1.0067

V​n ​= (0.99334)​6​ =

====> 5000 = EMI[1 - ]

0.0067

====> EMI = Rs. 853/-

LOAN AMORTIZATION TABLE

*********

51) Ramesh takes a loan of Rs. 1,20,000/- from a bank for a period of 8 months. Compute
the EMI at 12% p.a. on reducing balance? (Ans: Rs. 15,683/-)
52) Mr. Sinha wants to take a loan of Rs. 2 lakhs, to be repaid in 3 years. Bank X offers
him a loan at 10% p.a., flat interest rate and Bank Y offers him loan at 12% p.a. on
reducing balance. Comparing the EMI, decide which offer should be accepted.
(Ans: Rs. 7,222/-; Rs. 6,643/-. So Bank Y is chosen).

53) Rishabh required a loan of Rs. 6 lakhs which he wanted to repay in 4 years. IPL
Bank offered him at 9% p.a. on monthly reducing balance and HCL Bank at 10% p.a.
Flat interest rate. Comparing the EMI, advise him about the choice of the Bank?
(Ans: Rs. 14,931/- ; Rs. 17,500/-. So IPL Bank is chosen).

54) Mr. Bhandare purchases LCD TV worth Rs. 50,000/- from a dealer at 12% p.a.
Reducing balance interest rate. Find the EMI, if the repayments is to be made in 3 years?
(Ans: Rs. 1,661/-)

55) Rehan takes a loan of Rs. 30,000/-, to be repaid in one year at 9% p.a., reducing
balance interest rate. Find the EMI? (Ans: Rs. 2,624/-).

*****************