Question

A loan is returned in two equal yearly instalments of Rs.5,808. What is the total amount of the loan if the rate of compound interest, compounded annually, is 10% per annum?
1. Rs,12,450
2. Rs.10,080
3. Rs.18,000
4. Rs.10,800

Answer 1

Correct Answer - Option 2 : Rs.10,080

Formula:

Let P = Principal and A = equal instalment

P(1 + R/100)ⁿ = A/(1 + R/100)ⁿ + A/(1 + R/100)^{n + 1} + .....+ A/(1 + R/100)

Calculation:

Amount to be paid of loan = 5808/(1 + 10/100)¹  + 5808/(1 + 10/100)²

⇒ 5280 + 4800

⇒ 10080

∴ Amount to be paid as loan Rs.10080