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.
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?
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