Question

In: Math

Percentage and Applications

A sum of Rs.6000 is borrowed at 10% pa compounded interest and paid back in three equal annual instalments.

What is the approximate amount of each instalment?

Solutions

Expert Solution

Suppose the value of every instalment is Rs.P

If an amount P is compounded at interest rate of R for T years then the total amount = P(1 + R/100)T

Total amount to be paid = 6000 (1 + 10/100)3

Now when a person is giving first instalment of Rs.P at the end of 1st year it means on that amount compounded

interest will be applicable for 2 years. Similarly for 2nd instalment compounded will be applicable for 1 year.

So, P(1 + 10/100)2 + P(1 + 10/100) + P = 6000(1 + 10/100)3

=> 3.31P = 7986 => P = 2412 = Rs.2400 (approx.)

Amount for each installment = Rs.2400

Arjun A answered 3 years ago
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