A loan of ₹21600 is to be paid back in two equal annual instalments. If the rate of interest is 16% p.a. compounded yearly, then the total interest charged is

Correct option is B

Given:

Principal (Loan),  P = ₹21600 

Number of instalments = 2  (equal annual instalments)

Rate of interest r = 16% p.a. (compounded yearly)

Formula Used:

P = $$A\left(\frac{1}{(1+r)} + \frac{1}{(1+r)^2}\right)$$​​

Solution:

21600 = $$A\left(\frac{1}{1.16} + \frac{1}{(1.16)^2}\right)$$

21600 = A (0.8621 + 0.7432)

21600 = A(1.6053)

A = $$\frac{21600}{1.6053} \approx 13456$$​​

Total amount paid in 2 instalments:

= 2A = 2×13456 = ₹26912

Total interest charged:

= 26912 - 21600 = ₹5312

Alternate Solution (Exam Trick):