CA Foundation · Quantitative Aptitude · Mathematics of Finance
A loan of ₹1,00,000 is repaid in two equal annual instalments, the first due one year after the loan is taken, with interest at 10% per annum on the reducing balance. If each instalment is ₹57,619 (approximately), how much of the first instalment is principal?
The principal part of the first instalment is ₹47,619. The first year's interest is 10% of the full ₹1,00,000 loan, which is ₹10,000. Subtracting this interest from the instalment of ₹57,619 leaves ₹47,619 as the amount that reduces the loan.
- A₹10,000
- B₹47,619Correct
- C₹57,619
- D₹67,619
Explanation
Interest for year 1 = 10% of 1,00,000 = 10,000. Principal part = 57,619 - 10,000 = 47,619. Option ₹10,000 is only the interest, and ₹67,619 wrongly adds interest to the instalment.
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