Question

Three equal installments, each of Rs. 300, were paid at the end of the year on a sum borrowed at 20% compounded annually. Find the sum.

1. Rs. 530.945
2. Rs. 631.945
3. Rs. 603.945
4. Rs. 731.945
5. Rs. 562.455

Answer 1

Correct Answer - Option 2 : Rs. 631.945

Given:

The Rate of interest is 20 %

The Installment is Rs. 300

Number of installment is 3

Formula used:

P( 1+ R/100)ⁿ = X( 1+ R/100)^n-1  +  X( 1+ R/100)^n-2  + X( 1+ R/100)^{n -3} +  X( 1+ R/100)^n-4 + ----

Where,

P = principal

R = Rate       

n = number of installments

X = amount of installment

Calculation:

P(1 + 20/100)³ = 300(1+20/100)² + 300(1 + 20/100)¹+ 300

⇒ P(1.2)³ = 300 × 1.44 + 300 × 1.2 + 300

⇒ P(1.2)³ = 432 + 360 + 300

⇒ P = 631.945

∴ The sum is Rs. 631.95.