What yearly payment clears a debt totaling Rs 1092 due across 3 years carrying a 12% simple interest rate?
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Answer: A. Rs.325
Explanation
Using the standard simple interest installment formula accounts for the principal debt and accumulated interest over three years. Dividing the total debt obligation by the installment factor at a 12 percent simple interest rate yields the annual payment. Evaluating the formula correctly determines that an annual payment of Rs. 325 completely clears the debt. Simple interest is calculated solely on the initial principal amount over the duration of the loan. Installment formulas allow borrowers to pay off total debts through equal periodic payments over time. Financial mathematics uses specialized formulas to distribute principal and interest obligations across multiple periods.
Banking and consumer lending institutions use installment formulas to structure personal loans and repayment schedules. Understanding loan amortization helps individuals manage personal debt and evaluate financing options. This financial problem tests the application of specialized simple interest installment formulas. Option B overestimates the annual payment needed to clear the total debt within the three-year timeframe. Option C represents an incorrect installment amount that would overpay the total debt obligation. Option D results from a slight calculation error in the simple interest denominator expansion.
- Subject
- Mathematics
- Category
- Mathematics
- Topic
- —
- Difficulty
- medium
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