Question
Download Solution PDFSita takes a loan of Rs. 35,000 at an interest rate of 10% compound interest, compounded annually. She agrees to pay two equal instalments in 2 years, one instalment at the end of each year. Find the value of each instalment.(Round off to the nearest integer)
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFGiven:
Principal (P) = ₹35,000
Interest Rate (r) = 10%
Time (t) = 2 years
Formula Used:
Instalment (EMI) formula for compound interest:
P = EMI (1+(r) / (100))-1 + EMI (1+(r) / (100))-2
Calculation:
35,000 = EMI (1+(10) / (100))-1 + EMI (1+(10) / (100))-2
⇒ 35,000 = EMI (1+0.1)-1 + EMI (1+0.1)-2
⇒ 35,000 = EMI (1.1)-1 + EMI (1.1)-2
⇒ 35,000 = EMI (1) / (1.1) + EMI (1) / (1.12)
⇒ 35,000 = EMI (1)/ (1.1) + EMI (1)/ (1.21)
⇒ 35,000 = EMI (0.9091 + 0.8264)
⇒ 35,000 = EMI × 1.7355
⇒ EMI = (35,000) / (1.7355)
⇒ EMI ≈ ₹20,167
∴ The correct answer is option (3).
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