Answer: P = $ 12000
r = 14%
t = 1 (for first year)
I = (P X r X t)/100
∴ I = (12000 X 14 X 1)/100
= 120 X 14
= $ 1680 <---------- (Interest on loan at the end of first year)
∴ Total amount owing at the end of first year = (P + I)
= (12000 + 1680)
= $ 13680
Repayment = $ 7800
Amount still outstanding (at the start of second year) = 13680 - 7800
= $ 5880
Interest on the outstanding amount at the end of second year,
P (new) = $ 5880
r (same) = 14%
t = 1 (for the current second year)
∴ I = (P X r X t)/100
= (5880 X 14 X 1)/100
= 82320 / 100
= $ 823.2 <-------------------------- (Interest on outstanding amount at the end of second year)
