Jonathan had borrowed a sum of money 3 years ago at 10% interest per annum compounded annually for a 5-year period, with the amount to be paid at the end of the period being ₹1,61,051. However, there is no pre-payment penalty and Jonathan has received some bonus payment now, with which he has decided to clear his debt. How much does Jonathan have to pay now to clear his debt?
Show answer & explanation
Correct answer: C
Explanation
The correct answer is Option 3 i.e ₹1,33,100.
We know that,
A = P × (1 + R/100)T
here, A = Amount, P = Principal, R = Rate, and T = Time
Total interest to be paid after 5 years = ₹161051
⇒ 161051 = P × (1 + 10/100)5
⇒ 161051 = P × 1.61051
⇒ P = ₹1,00,000
Now interest left to be paid i.e. of the last two years
⇒ 100000 × (1 + 0.10)3
⇒ 100000 × (1.10)3
⇒ ₹1,33,100