A sum of ₹10,000 is taken as a loan by Rajesh at a rate of 15% p.a. simple interest for 2 years. Rajesh could not repay it at the agreed time and asked for an extension of two more years. The lender included the interest amount for the period as principal for the next two years at the same rate of interest. What is the total amount paid by Rajesh at the end of 4 years?

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Accepted Answer

Step 1: Calculate simple interest for the first 2 years.
Principal (P) = ₹10,000
Rate (R) = 15% per annum
Time (T) = 2 years
Simple Interest (SI) = (P × R × T) / 100 = (10,000 × 15 × 2) / 100 = ₹3,000

Step 2: At the end of 2 years, Rajesh could not pay, so the lender adds the interest to the principal.
New Principal = ₹10,000 + ₹3,000 = ₹13,000

Step 3: For the next 2 years, interest is calculated on ₹13,000 at 15% p.a. simple interest.
SI for next 2 years = (13,000 × 15 × 2) / 100 = (13,000 × 30) / 100 = ₹3,900

Step 4: Total amount to be paid at the end of 4 years = New Principal + SI for next 2 years = ₹13,000 + ₹3,900 = ₹16,900

Therefore, the correct answer is ₹16,900.

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