Tom bought a car worth sh 800000 using a loan from a credit corporation.He was to pay back using 4 equal yearly instalment of sh 200000.The lender charged compounds interest of 16% p.a and ledger fee at 1.5%p.a on each instalment is paid.What is the total amount of money that Tom paid to clear the loan?
To find the total amount of money Tom paid to clear the loan, we need to calculate the interest and ledger fee for each installment and then sum them up.
First, we calculate the interest for each installment. The interest rate is 16% p.a, so the interest for each year is 16% of the outstanding balance.
For the first installment:
Interest = 16% * 800,000 = 0.16 * 800,000 = 128,000
For the second installment, the outstanding balance is 800,000 - 200,000 = 600,000.
Interest = 16% * 600,000 = 0.16 * 600,000 = 96,000
For the third installment, the outstanding balance is 600,000 - 200,000 = 400,000.
Interest = 16% * 400,000 = 0.16 * 400,000 = 64,000
For the fourth and final installment, the outstanding balance is 400,000 - 200,000 = 200,000.
Interest = 16% * 200,000 = 0.16 * 200,000 = 32,000
Next, we calculate the ledger fee for each installment. The fee is 1.5% of the installment amount.
For each installment, the ledger fee is 1.5% * 200,000 = 0.015 * 200,000 = 3,000
Now, we can calculate the total amount of money paid by Tom to clear the loan.
Total amount = (Installment * Number of Installments) + (Interest for each installment * Number of Installments) + (Ledger fee for each installment * Number of Installments)
Total amount = (200,000 * 4) + ((128,000 + 96,000 + 64,000 + 32,000) * 1) + (3,000 * 4)
Total amount = 800,000 + (320,000) + 12,000
Total amount = 1,132,000
Therefore, Tom paid a total of sh 1,132,000 to clear the loan.
To calculate the total amount of money that Tom paid to clear the loan, we need to consider the principal amount, the interest charged, and the ledger fees.
1. Principal amount: Tom bought a car worth sh 800,000.
2. Interest charged: The lender charged compound interest of 16% per annum. To calculate the interest for each yearly installment, we can use the formula:
Interest = Principal amount * (annual interest rate)
For the first installment, the interest would be: sh 800,000 * (16% / 100) = sh 128,000
For the second installment, the interest would be: sh 800,000 * (16% / 100) = sh 128,000
For the third installment, the interest would be: sh 800,000 * (16% / 100) = sh 128,000
For the fourth installment, the interest would be: sh 800,000 * (16% / 100) = sh 128,000
3. Ledger fees: The ledger fee is 1.5% per annum on each installment. To calculate the ledger fee for each yearly installment, we can use the formula:
Ledger fee = Installment amount * (annual ledger fee)
For each installment, the ledger fee would be: sh 200,000 * (1.5% / 100) = sh 3,000
4. Total amount paid per year: The total amount paid each year would be the installment amount plus the interest charged plus the ledger fee. Therefore, the total amount paid per year would be: sh 200,000 + sh 128,000 + sh 3,000 = sh 331,000
5. Total amount paid to clear the loan: To calculate the total amount paid to clear the loan, we need to multiply the total amount paid per year by the number of years (4 in this case). Therefore, the total amount paid to clear the loan would be: sh 331,000 * 4 = sh 1,324,000.
So, the total amount of money that Tom paid to clear the loan is sh 1,324,000.