A builder borrows ₹ 2,550 to be paid back with compound interest at the rate of 4% per annum by the end of 2 years in two equal yearly instalments. How much will each instalment be?

Amount ‘A’ = Rs. 2550

R = 4% per annum

n = 2 years

let the two equal instalment be x

⇒ Present worth = instalment/(1 + r/100)ⁿ

\( \Rightarrow {{\rm{P}}_1} = \frac{x}{{{{\left( {1 + \frac{4}{{100}}} \right)}^1}}} = \frac{{25}}{{26}}x\)

\( \Rightarrow {{\rm{P}}_2} = {\left( {\frac{{25}}{{26}}} \right)^2}x = \frac{{625}}{{676}}x\)

⇒ P₁ + P₂ = A

⇒ 25/26x + 625/676x = 2550

⇒ (650 + 625)x/676 = 2550

⇒ 1275/676 x = 2550

⇒ x = (2550 x 676) /1275The value

⇒ x = 1352

∴The Value of each instalment will be Rs. 1352