Anand obtained a loan of Rs 125000 from the Allahabad Bank for buying computers. The bank charges compound interest at 8% per annum. Compounded annually. What amount will he have to pay after 3 years to clear the debt?s

Answer

To find the total amount Anand will have to pay after 3 years for the loan of Rs 125,000 at an 8% annual compound interest rate, we can use the formula for compound interest:

**Formula:**
\[ A = P \left(1 + \frac{r}{100}\right)^t \]

Where:
- \( A \) = the amount of money accumulated after n years, including interest.
- \( P \) = principal amount (the initial amount of money).
- \( r \) = annual interest rate (in percentage).
- \( t \) = time the money is invested or borrowed for, in years.

### Step 1: Identify the values
- Principal amount \( P = 125000 \)
- Rate of interest \( r = 8\% \)
- Time period \( t = 3 \) years

### Step 2: Substitute the values into the formula
\[ A = 125000 \left(1 + \frac{8}{100}\right)^3 \]

### Step 3: Calculate \( \frac{8}{100} \)
\[ \frac{8}{100} = 0.08 \]

### Step 4: Add 1 to the result
\[ 1 + 0.08 = 1.08 \]

### Step 5: Raise the result to the power of 3
\[ (1.08)^3 \]

Calculating \( (1.08)^3 \):
\[ 1.08 \times 1.08 \times 1.08 = 1.259712 \]

### Step 6: Multiply by the principal amount
\[ A = 125000 \times 1.259712 \]

Calculating:
\[ A = 157464 \]

### Step 7: Conclusion
The total amount Anand will have to pay after 3 years is **Rs 157,464**.

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