Q.A farmer takes a loan of ₹25,000 from an agricultural cooperative society and pays 5% simple interest annually. At the end of the first year, he repays ₹15,000 out of the ₹25,000. How much does he need to pay at the end of the second year to clear the entire loan?

In the first year, the farmer's loan amount = ₹25,000 \(\therefore\) Interest for the first year = \(\cfrac{25000 \times 1 \times 5}{100}\) = ₹1,250 In the second year, the remaining loan amount = ₹25,000 − ₹15,000 = ₹10,000 \(\therefore\) Interest for the second year = \(\cfrac{10000 \times 1 \times 5}{100}\) = ₹500 \(\therefore\) At the end of the second year, the farmer has to pay: ₹10,000 (remaining principal) + ₹1,250 (first year's interest) + ₹500 (second year's interest) = ₹11,750
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