QUESTIONS ON INSTALLMENTS [PART-II]

QUERY 11

Rs 9000 was borrowed at 20% p.a. compound interest to be repaid in two equal annual installments. What is the value of each installment?

A) 5097.95
B) 4987.90
C) 5890.91
D) 5820.25

MAHA GUPTA
9000 is the Principal

Rate of interest = 20%
Therefore, the Amount payable after 1 year = 9000 + 20% 0f 9000 = 9000+1800 = 10800

Now let X be the amount of equal installment
Therefore, loan left after giving 1st installment will be = Total Amount payable – installment = 10800 – X

So, amount of the installment after the completion of the second year = amount of loan left plus interest thereon = (10800 – X)*120%
= (10800 – X)*(120/100)

But the amount of installment is X
Thus, (10800 – X)*(120/100) = X
=> X = 5890.91 (appox) [option ‘C’]