A man borrows 1200 at 10% per annum compound interest. If he repays 250 at the end of each year, find the amount of loan outstanding at the beginning of 4th year?  

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justaguide | College Teacher | (Level 2) Distinguished Educator

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The man borrows 1200 at 10% per annum compound interest. The interest charged each year is on the sum of the principal and the interest accrued till the last year.

At the end of each of the first three years 250 is paid.

The interest accrued at the end of the 1st year is 120, as 250 is being repaid, the principle is reduced by 130 and the amount outstanding is 1070.

In the 2nd year, the interest charged is 107. As the man pays back 250, the principal is reduced by 143 and the amount outstanding is 927.

In the 3rd year, the interest charged is 92.7. As the man pays 250, the principal is reduced by 157.3 and the amount outstanding is 769.7

The amount outstanding at the beginning of the 4th year is 769.7

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