A loan of ₹1,50,000 is availed with compound interest rate of 10% per annum for two years compounded annually. It is to be paid in equal yearly instalments; and the instalment is to be paid at the end of each year. The value of the equal yearly instalment is : (Rounded off to two places of decimal)
Show answer & explanation
Correct answer: A
Explanation
The correct answer is Rs. 86,428.57 i.e.
We know that,
P = X(K + K2 + K3 + ...................)
where K = 100/(100 + r) and X = installment
Here only two years and r is 10% then
P = X(K + K2)
150000 = X(10/11 + (10/11)2)
150000 = X(10/11 + 100/121)
150000 = X(110/121 + 100/121)
150000 = X(210/121)
X = 150000 × 121/210
X = 86428.57