Sonam took a loan of Rs 1,00,000 at 10% rate for 2 years compounded annually. He repays a sum of Rs 40,000 at the end of first year. What is the amount that he must pay at the end of the second year?
Explanation:
The amount payable after the first year is 1,00,000 × 1.1 = Rs 1,10,000
As he repays Rs 40,000 after first year, the amount left is 1,10,000 – 40,000 = 70,000
So, the second year’s interest will only be on the remaining Rs. 70,000.
Amount payable at the end of the second year = 70,000 × 1.1 = Rs. 77,000.
Hence, option (a).
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