Question

John takes a loan of Rs. 45,500 from the bank at the rate of 20% per annum compound interest and agrees to pay it in 3 equal installments, one installment at the end of every year. Find the value of each installment.

• A. Rs. 20,500
• B. Rs. 21,000
• C. Rs. 21,400
• D. Rs. 21,600

Answer 1

The correct option is D Rs. 21,600

Let each installment be Rs. X, then

$\frac{X}{(1+\frac{20}{100})}+\frac{X}{{(1+\frac{20}{100})}^2}+\frac{X}{{(1+\frac{20}{100})}^3}=45,500$

$\Rightarrow \frac{5X}{6}+\frac{25X}{36}+\frac{125X}{216}=45,500$

$\Rightarrow \frac{180X+150X+125X}{216}=45,500$

⇒ X = 21,600

Hence, option D is the correct answer.