Question

Mr. A took a loan of Rs. 1 lakh from a bank which charges 10% p.a. compound interest on the decreasing amount. He wants to pay the entire loan including the interests in two equal annual instalments starting from the end of the first year. Find the amount of each instalment.

• A. Rs. 57931.48
• B. Rs. 57619.05
• C. Rs. 57892.50
• D. Rs. 57345.28

Answer 1

The correct option is B Rs. 57619.05

Let each instalment be Rs. 100P.

In the first year, interest accrued = 10% of Rs. 1 lakh = Rs. 10000

So, the amount = Rs. 110000

After the first instalment is paid, remaining amount = Rs. (110000 – 100P)

So, in the second year, the interest accrued = 10% of Rs. (110000 – 100P) = Rs. (11000 – 10P)

So, the amount after the second year = Rs. (121000 – 110P)

This should be the same as 100P.

So, 121000 – 110P = 100P

⇒ 121000 = 210P

⇒ P = 12100/21

⇒ 100P = 1210000/21 = Rs. 57619.048 (Approx.)