Anand obtained a loan of Rs. 125000 from the Allahabad Bank for buying computers. The bank charges compound interest at 8% per annum, compounded annually. What amount pwill he have to pay after 3 years to clear the debt?
Present value = Rs.125000
Interest rate = 8% per annum
Time = 3 years
Amount (A) = P (1 + R/100)n [Where, P = Present value
R = Annual interest rate
n = Time in years]
∴ A = 125000 (1 + 8/100)3
⇒ A = 125000 (108/100)3
⇒ A = 125000 × 108/100 × 108/100 × 108/100
⇒ A = 125000 × 1259712/1000000
⇒ A = 125 × 1259712/1000
⇒ A = 1259712/8
⇒ A = 157464
∴ Amount = Rs.157464
∴ Anand has to pay Rs.157464 after 3 years to clear the debt.