What annual payment will discharge a debt of Rs. 580 due in 5 years, the rate being 8 % per SI annum?

No.

How long is that first deposit earning interest?

Q:How long is that first deposit earning interest?
A:For the 1st year

Si for 1st year on 'x' = (x*8*1)/100 = 8x/100
x+ 8x/100=108x/100.

At
this Point,I am having doubts
q1: This is Si sum so i should not add interest . I will keep it for later calculation?
q2: Am i paying the first installment to the bank or the lender ?
 
Please explain your understanding of the whole problem. Or perhaps refer me to a source that explains this kind of loan, as you have learned it. As far as I can tell, this is something that is done only in your country, so you have to tell us the rules for the loan (even if I had not told you I don't know finance). Also, are you asking this question because it is in a course you are taking, or just because you found it on that site (or others)?

As I read it (based on the interpretation in the answer you referred to, and as I've already explained), the first payment is going to earn interest for 4 years -- from the time it is paid, until the 5-year due date. How do you get 1 year?

I think you can think of each payment as going to the lender, who then in principle banks it until the due date.
 
Please explain your understanding of the whole problem. Or perhaps refer me to a source that explains this kind of loan, as you have learned it. As far as I can tell, this is something that is done only in your country, so you have to tell us the rules for the loan (even if I had not told you I don't know finance). Also, are you asking this question because it is in a course you are taking, or just because you found it on that site (or others)?

As I read it (based on the interpretation in the answer you referred to, and as I've already explained), the first payment is going to earn interest for 4 years -- from the time it is paid, until the 5-year due date. How do you get 1 year?

I think you can think of each payment as going to the lender, who then in principle banks it until the due date.
see every year he is paying x rupees and for that individual year he is givng that year interest on x .
x+ 8x/100=108x/100.
now this will continue upto 4 years or 5 years ?? that i am unsure .Shall he give interest on the last year ?


One of my peers told me that :

Think of this not from your perspective but the perspective of the bank or lender who is receiving payments.

They receive the first x payment after 1 year, and THEY invest it at 8% interest. So they get 4 years of interest on that x.

I don't think this problem is one about you receiving interest. It is about cash flows to the bankj: your four annual payments plus all the interest the bankj can earn from them.

The original question asked for what size payments you can make so that the bank will have 580by the end. It is not a problem about you earning interest.
 
see every year he is paying x rupees and for that individual year he is giving that year interest on x .
x+ 8x/100=108x/100.
now this will continue up to 4 years or 5 years ?? that i am unsure .Shall he give interest on the last year ?
No. Interest is not paid on the payment. Interest is always paid based on how much is owed, in some sense.

This appears to be your own guess about the meaning. Please answer: Have you been taught anything about this kind of problem? We need to see an official explanation, from a textbook or class notes, of the situation. Then we can try to explain to you what they are saying. If you can't do that, then I can't continue trying to help you. You must cooperate, or I will stop responding.

One of my peers told me that :

Think of this not from your perspective but the perspective of the bank or lender who is receiving payments.

They receive the first x payment after 1 year, and THEY invest it at 8% interest. So they get 4 years of interest on that x.

I don't think this problem is one about you receiving interest. It is about cash flows to the bank: your four annual payments plus all the interest the bank can earn from them.

The original question asked for what size payments you can make so that the bank will have 580 by the end. It is not a problem about you earning interest.
That agrees with what I have been trying to communicate to you. I've been supposing that the Rs 580 is owed to a store, perhaps, and they put the money in a bank, but it is the same if the payments go directly to a bank. You're right that the interest is going to the bank/creditor, not to you (of course not!).

On the other hand, you could imagine that you make payments into your own account, which earns interest, and then at the end of 5 years you give that account (Rs 580) to the creditor. The mathematics would be the same. But don't think that if it confuses you.

But you make 5 payments, not 4. You pay at the end of each of the 5 years; the last payment is at the time the total amount is due.

Let me remind you again: I have never seen this kind of payment plan (which doesn't mean much, as I am not a banker as others here are). I am just trusting what others have been telling you. I will not be sure of anything until I see an explanation from your source. And if you have no authoritative source, then there is no reason to be doing any of this.
 
One of my peers told me that :

i know u are getting hesitated, hats off to ur patience to bear with me
They receive the first x payment after 1 year, and THEY invest it at 8% interest. So they get 4 years of interest on that x.

just explain this line The payment made at end of first year has 4 years to earn simple interest but I made the first payment at the end of first year so it has only that year to year interest so why considering the advance 4 years for that
 
Others saying that bank is investing the first payment for the next 4 years .What is meaning of invest? is it giving lends to other customers
 
@Dr.Peterson
hats off to ur patience to bear with me

just explain these lines
They receive the first x payment after 1 year, and THEY invest it at 8% interest. So they get 4 years of interest on that x.

The payment made at end of first year has 4 years to earn simple interest but I made the first payment at the end of first year so it has only that year to year interest so why considering the advance 4 years for that


Others saying that bank is investing the first payment for the next 4 years .What is meaning of invest? is it giving lends to other customers
 
I told you I won't answer until you tell me what you have been taught. Don't keep quoting peers and asking what they mean; answer my questions! Ignoring my questions is disrespectful.

Once again, please tell me whether you are taking a course, and what topics have been covered; and specifically, what has been said about this kind of payment. The question itself can be taken in several ways; I want to see what the people who wrote the question think it means.
 
I was doing this sum in simple interst chapter. I dont know how to this . Thats it .
 
So they never explain this method of making payments? Nothing is said about it until this problem is given, and you have quoted it exactly as it is in the book?

Sue the publisher. They need to actually teach you something.
 
So they never explain this method of making payments? Nothing is said about it until this problem is given, and you have quoted it exactly as it is in the book?

Sue the publisher. They need to actually teach you something.
In India rs agarawal is one of the most popular books for Aptitude.
But their job is to provide questions.
If u can explain the part that my peer has told.I think u can get to the end of the sum.
So please explain that bank is investing part.
 
Here is a picture (again, as I understand it from others' answers):

Code:
0     1     2     3     4     5
+-----+-----+-----+-----+-----+
      P========================>
            P==================>
                  P============>
                        P======>
                              P>

Each P is a payment; the bars after them are the amount of time they are earning interest until the due date, at which time the creditor expects to have the required amount, Rs 580. This total is calculated in the way you have been told numerous times, essentially adding the simple interest for 4, 3, 2, 1, and 0 years on each payment x, respectively.

I can't tell you what the bank is actually doing unless someone explains it; but this is at least what they are thinking.
 
Here is a picture (again, as I understand it from others' answers):

Code:
0     1     2     3     4     5
+-----+-----+-----+-----+-----+
      P========================>
            P==================>
                  P============>
                        P======>
                              P>

Each P is a payment; the bars after them are the amount of time they are earning interest until the due date, at which time the creditor expects to have the required amount, Rs 580. This total is calculated in the way you have been told numerous times, essentially adding the simple interest for 4, 3, 2, 1, and 0 years on each payment x, respectively.

I can't tell you what the bank is actually doing unless someone explains it; but this is at least what they are thinking.
That is where I am having doubts.
Why first installment having advance 4 years interest
 
Please tell me what you are thinking when you ask that.

What do you think I am saying?

What do you think would be correct instead?

If you keep just saying you don't understand, each time you are given a new explanation, you don't help us get past whatever it is that is confusing you. Tell me something new.
 
Please tell me what you are thinking when you ask that.

What do you think I am saying?

What do you think would be correct instead?

If you keep just saying you don't understand, each time you are given a new explanation, you don't help us get past whatever it is that is confusing you. Tell me something new.
MY view is that i am giving the first payment to the bank and from there they are investing my money to other lenders. But still i dont know how interest is being calculated on those 4 years ?
 
MY view is that i am giving the first payment to the bank and from there they are investing my money to other lenders. But still i dont know how interest is being calculated on those 4 years ?

For how long are they investing this money, in your view? Is it only one year as you've told me? Is it not 4 years, as I've said?

You are aware, I hope, that banks make their money by lending, so the money they get in (such as this payment), they lend to someone else to get interest. They don't lend to lenders; they lend to borrowers!
 
For how long are they investing this money, in your view? Is it only one year as you've told me? Is it not 4 years, as I've said?

You are aware, I hope, that banks make their money by lending, so the money they get in (such as this payment), they lend to someone else to get interest. They don't lend to lenders; they lend to borrowers!
Am i paying only the payment or with the interest?
THen again its a sum of si . What is the significance of simple interest here?
 
What does the problem say?

You're paying some fixed amount x at the end of each year. Interest is being added to what the creditor gets, so that it counts toward the 580.

Each amount paid earns simple interest from then until the end of the 5 years.

Please think for yourself, and tell us what you think. Don't just ask trivial questions; if we're going to be able to help you, we need to know why you are asking these questions.
 
Suppose i am paying 'x' at the end of 1st year. So i will be getting interest on that 1st year only ...why Each amount paid earns simple interest from then until the end of the 5 years.
 
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