A man borrowed â¹30,000 at the rate of 12% per annum simple interest from a bank. He paid â¹15,200 after two years to the bank. How much will he have to pay after two more years to clear the loan?

Keywords: Simple interest, loan repayment, principal, interest.

Required Approach: Factual/Analytical

Points to Remember:

Simple interest calculation: Interest = Principal Ã Rate Ã Time
Loan repayment involves paying back both principal and accumulated interest.
Calculation of remaining principal after partial payment.

Introduction:

This question involves a simple interest loan calculation. Simple interest is a method of calculating interest where the interest amount is only based on the principal amount borrowed. It does not compound (meaning interest is not calculated on previously accrued interest). The formula for calculating simple interest is: Interest = Principal Ã Rate Ã Time / 100. This problem requires us to calculate the interest accrued over a period of time, account for a partial payment, and determine the remaining amount owed.

Body:

1. Calculating Interest Accrued after Two Years:

Principal (P) = â¹30,000
Rate (R) = 12% per annum
Time (T) = 2 years

Interest = (30000 Ã 12 Ã 2) / 100 = â¹7200

Total amount due after two years = Principal + Interest = â¹30,000 + â¹7200 = â¹37,200

2. Calculating Remaining Amount After Partial Payment:

Amount due after two years = â¹37,200
Amount paid = â¹15,200

Remaining amount due = â¹37,200 – â¹15,200 = â¹22,000

3. Calculating Amount Due After Two More Years:

The remaining amount of â¹22,000 now acts as the new principal for the next two years.

Principal (P) = â¹22,000
Rate (R) = 12% per annum
Time (T) = 2 years

Interest = (22000 Ã 12 Ã 2) / 100 = â¹5280

Total amount due after two more years = Principal + Interest = â¹22,000 + â¹5280 = â¹27,280

Conclusion:

The man will have to pay â¹27,280 after two more years to clear the loan. This calculation demonstrates the straightforward nature of simple interest calculations. While simple interest is easy to understand and calculate, it’s important to note that it generally results in lower returns for lenders compared to compound interest. For borrowers, understanding simple interest calculations allows for accurate budgeting and planning of loan repayments. Financial literacy, including understanding different types of interest calculations, is crucial for responsible financial management. Promoting financial literacy through educational programs and accessible resources is essential for empowering individuals to make informed financial decisions.

UKPCS Notes brings Prelims and Mains programs for UKPCS Prelims and UKPCS Mains Exam preparation. Various Programs initiated by UKPCS Notes are as follows:-

For any doubt, Just leave us a Chat or Fill us a querry––