Question

Ravi took a loan from HDFC Bank for his 2-year MBA program at IIM. He took the loan of ₹ 6 lakh such that he would be charged at 8% per annum compound interest during his program and at 10% per annum compound interest after completion of course. He returned half of the amount which he had to pay on the completion of his program and remaining after 2 years. What is the total amount returned by Ravi?

Accepted Answer

A. Amount after 2 years at 8% p.a. CI = $6 	imes (1 + 0.08)^2 = 6 	imes 1.1664 = 6.9984$ lakh. He repays half: $3.4992$ lakh. Remaining balance = $3.4992$ lakh. This remaining balance compounds at 10% p.a. for 2 years: $3.4992 	imes (1 + 0.10)^2 = 3.4992 	imes 1.21 = 4.234032$ lakh. Total amount returned = $3.4992 + 4.234032 = 7.733232$ lakh.

MBA Loan Repayment with Compound Interest

Explanation

Practise this under exam conditions