Maths · Arithmetic and Geometric progressions
A sum of Rs. 11000 was taken as a loan. This is to be repaid in two equal instal
A sum of Rs. 11000 was taken as a loan. This is to be repaid in two equal instalments. If the rate of interest be \( 20 \% \) compounded annually, then the value of each instalment is
- A. Rs. 8420
- B. Rs. 7920
- C. Rs. 7200
- D. Rs. 7000
Step-by-step solution
The loan of Rs. 11000 is to be repaid in two equal annual instalments at 20% compound interest. Let each instalment be x. The present values of the instalments are x/(1.2) and x/(1.2)^2. Equating the sum to the loan: x/1.2 + x/1.44 = 11000. Solving gives x = 7200.
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