Question

6. A bank gives a loan to a company to purchase an equipment worth 10,00,000 US Dollars at an interest rate of 18% compounded annually. This amount should be repaid in 15 yearly equal installments. Find the installment amount that the company has to pay to the bank. 7. A person is planning for his retired life. He has 10 more years of service. He would like to deposit 20% of his salary, which is 4,000 US. Dollars at the end of the first year, and thereafter he wishes to deposit the amount with an annual increase of Rs. 500 for the next 9 years with an interest rate of 15%. Find the total amount at the end of the 10th year of the above series.

Answer 1

6) EMI formula = [P * r * (1 + r)^ⁿ] / [(1 + r)^ⁿ - 1]

P = 1,000,000

r = 18% = 0.18

n = 15

EMI =  [1,000,000 * 0.18 * (1 + 0.18)^¹⁵] / [(1 + 0.18)^¹⁵ - 1] = 196,402.78

Company has to pay 196,402.78 annually to the bank.

7) First deposit = $4,000 which rises by $500 each year

Interest rate = 15%

Future value is calculated as: [Money saved * (1 + Rate of Interest)^^{Money saved for years}]

Year	Money saved	Years for which money is saved	Future value
1	4,000.00	9	14,071.51
2	4,500.00	8	13,765.60
3	5,000.00	7	13,300.10
4	5,500.00	6	12,721.83
5	6,000.00	5	12,068.14
6	6,500.00	4	11,368.54
7	7,000.00	3	10,646.13
8	7,500.00	2	9,918.75
9	8,000.00	1	9,200.00
10	8,500.00	-	8,500.00
			115,560.60

Future value of money saved at the end of 10 years is 115,560.6