A man borrows ₹ 3,310 and undertakes to pay it back with compound interest at 10% per annum in three equal yearly installments at the end of the first, second, and third years. What is the amount of each installment?
Show answer & explanation
Correct answer: D
Explanation
The correct answer is Option 4 i.e. ₹1,331.
Principal = Rs 3310
r = 10% = 1/10
He repays the loan in three equal installments at a compound interest rate.
Principal : installments
1st installment (10 : 11)x × 11 × 11
2nd installment (10 × 10 : 11 × 11)x × 11
3rd installment 10 × 10 × 10x : 11 × 11 × 11x
Total Principal = 10 × 121x + 100 × 11x + 1000x
3310 = 1210x + 1100x + 1000x
3310 = 3310x
x = 1
Each installment = 11 × 11 × 11x = 1331x
= 1331 × 1 = Rs 1331