Question

A farmer has taken a loan from Kidar Co. for INR 100. Kidar Co. told the farmer that he can take INR 100 today but will have to pay the company INR 110 after 30 days. If the farmer was not able to pay off the loan for over a year, what is the amount he is supposed to pay to Kidar Co. Interest is compounded every 30 days (Take 1 year has 360 days). (Answer rounded to the nearest integer in INR)

Select one:

a. 1238

b. None of the above

c. 769

d. 314

e. 400

Answer 1

d.314.

first let us know the interest rate per period of 30 days:

=>(amount to be paid after 30 days - amount borrowed) / amount borrowed.*100

=>(110-100) / 100*100

=>10%.

number of 30 days periods in one year = 360 days /30 days

=>12.

amount to be paid after one year can be known using compound interest formula:

amount to be paid = amount borrowed *(1+ interest rate per period) ^number of periods

=>100*(1.10)^12

=>100*3.13842838

=>313.84

=>314.