If a sum of ₹1,00,000 is to be paid back in two equal annual instalments at 11/4 percent compound interest per annum in the case of annual compounding, what is the value of each instalment? (Rounded off to nearest integral value)
Show answer & explanation
Correct answer: C
Explanation
The Correct answer is option 3 i.e. ₹52,072
Given that
Borrowed sum = ₹1,00,000
It is paid in two equal instalments at the compound interest rate 11/4 % per annum
Let the value of each installment = x
Formula used
Sum = x/(1 + rate/100)1 + x/(1 + rate/100)2
Calculation
⇒100000 = x/(1 + 11/400)1 + x/(1 + 11/400)2
⇒ 100000 = (400x/411) + (160000x/168921)
⇒ 100000 = (164400x + 160000x)/168921
⇒ 100000 = (324400x/168921)
⇒ x = 52072