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?

₹551.25

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