A loan of Rs. 13120 at 5% per annum compound interest is to be repaid in two equal installments at the end of year. Find amount of each installment.
Answer & explanation
Correct answer: option 4
P : installment
1st year 20 : 21 ...............(i)
2nd year (20)2 : (21)2
As installments are equal so multiply (i) by 21
P : installment
1st year 420 : 441
2nd year 400 : 441
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820(Total) 441 (each Inst.)
⇒ 820 → 13120 (given)
⇒ Each Installment = 441 × 16 = 7056
OR
\(\frac{x}{(1 + \frac{5}{100})}\) + \(\frac{x}{(1 + \frac{5}{100})^2}\) = 13120
\(\frac{20}{21}\) x + (\(\frac{20}{21}\))2 x = 13120
\(\frac{20x}{21}\) (1 + \(\frac{20}{21}\)) = 13120
x = \(\frac{13120 × 21 × 21}{20 × 41}\) = 7056