Sita takes a loan of ₹35,000 at an interest rate of 10% compound interest, compounded annually. She agrees to pay two equal instalments in 2 years, one instalment at the end of each year. Find the value of each instalment.(Round off to the nearest integer)
Show answer & explanation
Correct answer: C
Explanation
The correct answer is option 3 i.e. ₹20,167.
Given that, principle = ₹35,000
Rate = 10%
Time = 2 years
Let the installment at the end of each year be x.
P = x/[1 + r/100] + x/[1 + r/100]2
According to the given question,
35000 = x/[1 + 10/100] + x/[1 + 10/100]2
⇒ 35000 = 10x/11 + 100x/121
⇒ 35000 × 121 = 110x + 100x
⇒ 210x = 4235000
⇒ x = 20166.66 ≈ 20167
Hence the value of each instalment is ₹20,167.