A man borrows a sum of ₹1,025 and pays back in two equal yearly instalments. If the rate of interest is 5% p.a, compounded yearly, then how much is each instalments?
Answer & explanation
Correct answer: option 4
Rate of interest = 5%
= \(\frac{1}{20}\)
Principal Amount
1st installment 20 : 21
2nd installment 20² : 21²
{ As both installment are equal, So multiply 1st by 21 }
1st installment 20×21 : 21×21
------------------------------------------------------------------------
820 : 882
ATQ,
820R = 1025
1R = 1.25
Now, Amount of each installment = 441 × 1.25
= Rs. 551.25