Question

A loan if 12 000 was borrowed from a bank at 14% per annum calculate the total amount owning at the first year​

Answer 1

Answer: P = $ 12000

r = 14%

t = 1 (for first year)

I = (P X r X t)/100

∴ I = (12000 X 14 X 1)/100

   = 120 X 14

   = $ 1680   <---------- (Interest on loan at the end of first year)

∴ Total amount owing at the end of first year = (P + I)

                                                                          = (12000 + 1680)

                                                                          =  $ 13680

Repayment = $ 7800

Amount still outstanding (at the start of second year) = 13680 - 7800

                                                                                       =  $ 5880

Interest on the outstanding amount at the end of second year,

P (new) = $ 5880

r (same) = 14%

t = 1 (for the current second year)

∴ I = (P X r X t)/100

   = (5880 X 14 X 1)/100

   = 82320 / 100

   = $ 823.2   <-------------------------- (Interest on outstanding amount at the end of second year)