Question

you have to loan Rs 75000 for 2 years for a purpose. if a finance company A lends money at 10% per annum compounded annually and Finance Company B lends money at 8% per annum compounded semi annually for which Finance Company will you take the loan and why give your reason with calculation​

Answer 1

He will take the loan from Company B.

Step-by-step explanation:

Given,

For Company A

Principal (P) = Rs 75000

Time (T) = 2 years

Rate of interest (R) = 10%

For Company B

Principal (P) = Rs 75000

Time (T) = 2 years

Rate of interest (R) = 8%

To find the amount of the loan he has to pay for both the companies.

Formula

Amount =P $(1+\frac{R}{100} )^{T}$

Amount= P$(1+\frac{R}{100Xn} )^{nT}$

For Company A

Amount = 75000$(1+\frac{10}{100}) ^{2}$ [ Here, P= 75000, T=2 and R = 10%]

= 194530 (approx)

For Company B

Amount = 75000($(1+\frac{8}{200} )^{4}$ [ Here, P= 75000, T=2, n = 2 and R = 8%]

= 87739 (approx)

Hence,

He will take the loan from Company B, because he has to pay less money for this company.