Question 84
A sum of Rs.16400 is borrowed to be paid back in 2 years by equal payments allowing 5% Compound Interest. Find the annual payment.
Solution
Let x be the instalment amount
As we know that for equal instalment,
P = $$\frac{x}{(1+\frac{r}{100})^{1}} + \frac{x}{(1+\frac{r}{100})^{2}}$$
16400 = $$\frac{x}{(1+\frac{5}{100})^{1}} + \frac{x}{(1+\frac{5}{100})^{2}}$$
16400 = $$\frac{20x}{21}+\frac{400x}{441}$$
16400 = $$\frac{820x}{441}$$
x = $$\frac{16400\times441}{820}$$
x = 8820
Required annual payment = Rs 8820
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