Answer the questions from based on following paragraph.

Preeti, Kabir and Shershah are partners in a firm. Kabir retires from the firm. On his date of retirement, ₹1,00,000 became due to him. Preeti and Shershah promised to pay him in four yearly equal installments plus interest @ 12% p.a. on the unpaid balance every year at the end of the year, to which he agreed.

Net Amount of installment payable at the end of 2nd year to Kabir is:

₹34,000

The correct answer is option 2- ₹34,000.

Total due amount = 1,00,000
Installments = 4
Each installment = 1,00,000/4
                         = 25,000

Ist installment = 25,000 + Interest on unpaid balance i.e. 1,00,000
                      = 25,000 + (1,00,000 x 12/100)
                      = 25,000 + 12,000
                      = 37,000

Remaining balance after ist installment = 1,00,000 - 25,000
                                                         = 75,000

2nd installment = 25,000 + Interest on unpaid balance i.e. 75,000
                       = 25,000 + (75,000 x 12/100)
                       = 25,000 + 9,000
                       = 34,000

Thus, 2nd installment amount will be 34,000.