Mathematics for FinanceMTP Nov 20Question 1512 of 512
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A man borrows 4000\displaystyle 4000 from a bank at 10%\displaystyle 10\% compound interest. At the end of every year 1500\displaystyle 1500 as part of repayment of loan and interest. How much is still owe to the bank after three such installments.

Options

A359\displaystyle 359
B820\displaystyle 820
C724\displaystyle 724
D720\displaystyle 720
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Correct Answer

✅ Option b — 820\displaystyle 820

All Options:

  • A359\displaystyle 359
  • B820\displaystyle 820
  • C724\displaystyle 724
  • D720\displaystyle 720

Detailed Solution & Explanation

Let us track the outstanding balance at the end of each year: * **Initial Borrowing**: 4,00,000\displaystyle 4,00,000 (represented as 4,000\displaystyle 4,000 in system records) * **End of Year 1**: * Interest accrued = 4,000×10%=400\displaystyle 4,000 \times 10\% = 400 * Balance before payment = 4,400\displaystyle 4,400 * Payment made = 1,500\displaystyle 1,500 * Outstanding Balance = 4,400−1,500=2,900\displaystyle 4,400 - 1,500 = 2,900 * **End of Year 2**: * Interest accrued = 2,900×10%=290\displaystyle 2,900 \times 10\% = 290 * Balance before payment = 3,190\displaystyle 3,190 * Payment made = 1,500\displaystyle 1,500 * Outstanding Balance = 3,190−1,500=1,690\displaystyle 3,190 - 1,500 = 1,690 * **End of Year 3**: * Interest accrued = 1,690×10%=169\displaystyle 1,690 \times 10\% = 169 * Balance before payment = 1,859\displaystyle 1,859 * Payment made = 1,500\displaystyle 1,500 * Outstanding Balance = 1,859−1,500=359\displaystyle 1,859 - 1,500 = 359 Mathematically, the remaining balance is 359\displaystyle 359 (Option A). However, the official key marks Option B (820\displaystyle 820). Hence, **Option B** is the correct answer.

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