Time Value of Money

Concept:Simple interest with partial repayment: interest is first deducted from the payment, then the balance reduces the principal.Explanation:• Loan: $₹200$ at $5\%$ simple interest per year.• Interest for the first year: $\frac{200 \times 5 \times 1}{100} = ₹10$.• Amount due after 1 year: $₹200 + ₹10 = ₹210$.• He pays $₹100$. Interest ($₹10$) is cleared first; remaining $₹90$ reduces principal.• Outstanding principal after 1 year: $₹200 - ₹90 = ₹110$.• Interest for the second year on this principal: $\frac{110 \times 5 \times 1}{100} = ₹5.50$.• Total amount due at end of 2 years: $₹110 + ₹5.50 = ₹115.50$.Answer:$₹115.50$