Question

Minty borrowed an amount of Rs. 18900 at an interest rate of 10% pa, compounded annually. She repaid the entire amount in two equal installments. What is the value of each installment?
1. Rs. 10,750
2. Rs. 10,860
3. Rs. 10,980
4. Rs. 10,890
5.  Rs. 10,560

Answer 1

Correct Answer - Option 4 : Rs. 10,890

Calculation:

Let the value of each installment be x

Total amount after 2 years = 18,900[1 + 0.1]²

Minty pays the 1^st installment at the end of one year and 2^nd installment at the end of two years.

∴ 18900[1 + 0.1]² = x[1 + 0.1] + x

⇒ 18900 × 1.21 = 2.1x

⇒ x = 10890

The value of each installment is Rs. 10,890.