Johnson borrows ₹30,000 at 5% compound interest per annum. He wants to pay this amount back by the end of 2 years in two equal yearly installments. How much does he have to pay approximately at the end of each year?
Show answer & explanation
Correct answer: B
Explanation
The Correct answer is option 2 i.e. ₹16,134
Given that
Johnson borrows ₹30,000 at R = 5% compound interest per annum
By the end of 2 years in two equal yearly installments, he will have paid the amount
Let the installments be x
Formula used
For installment at CI, P = x/{1 + (R/100)} + x/{1 + (R/100)}2
Calculation
⇒ 30000 = x/{1 + (5/100)} + x/{1 + (5/100)}2
⇒ 30000 = 20x/21 + 400x/441
⇒ 8820x + 8400x = 30000 × 9261
⇒ x = ₹16134.14 ≈ ₹16134
Hence, the each equal installment is ₹16134