Shortcut Trick
If no repayment was made, the total amount payable after 2 years = Principal + 2 years SI = 6,23,305 + (20% of 6,23,305) = 6,23,305 + 1,24,661 = ₹7,47,966.
Since ₹16,390 is repaid towards the principal after 1 year, this amount is deducted from the final dues.
Additionally, the 10% interest saved on this repaid amount for the 2nd year is also deducted = 10% of 16,390 = ₹1,639.
Total deduction from final amount = 16,390 + 1,639 = ₹18,029.
Final payment = 7,47,966 − 18,029 = ₹7,29,937.
∴ The correct answer is ₹7,29,937.
Alternate Method
Given:
Principal (P) = ₹6,23,305
Rate (R) = 10% p.a. simple interest
Repayment at the end of Year 1 = ₹16,390 (towards principal)
Formula Used:
Simple Interest = (P × R × T) ÷ 100
Start (Year 0)
P = ₹6,23,305
Year 1 End
-₹16,390 (Prin)
Year 2 End
Final Due
SI&sub1; = ₹62,330.5
New Principal:
₹6,06,915
SI&sub2; = ₹60,691.5
Total Payment:
₹7,29,937
Calculations:
⇒ Interest for Year 1 (I1) = (6,23,305 × 10 × 1) ÷ 100 = ₹62,330.5
⇒ Since ₹16,390 is repaid towards the principal, the new principal for Year 2 is calculated.
⇒ New Principal (P') = 6,23,305 − 16,390 = ₹6,06,915
⇒ Interest for Year 2 (I2) = (6,06,915 × 10 × 1) ÷ 100 = ₹60,691.5
⇒ Total payment at the end of Year 2 = Remaining Principal + Pending Interest for Year 1 + Interest for Year 2
⇒ Total payment = 6,06,915 + 62,330.5 + 60,691.5 = ₹7,29,937
∴ The correct answer is ₹7,29,937.
Additional Information
Partial Payments in Simple Interest
When partial payments are made specifically towards the principal, the interest for subsequent periods is calculated on the reduced principal base. Any unpaid interest simply accumulates and remains pending without compounding.
Simple Interest Direct Formula
When no midway repayments are made, Total Amount = P[1 + (R × T) ÷ 100]. This represents the standard linear growth of debt over time.
Simple vs Compound Interest Concept
In Simple Interest, only the active principal amount generates interest. If this had been Compound Interest, the unpaid Year 1 interest (₹62,330.5) would have been added to the principal, causing interest to be earned on interest in Year 2.