Question
Download Solution PDFA woman borrowed ₹25,220 and she returned the money in three equal instalments after one, two and three years. If the rate of compound interest is 5%, then find the value of each instalment.
Answer (Detailed Solution Below)
Detailed Solution
Download Solution PDFGiven:
Principal = ₹25,220
Rate of interest = 5%
Number of instalments = 3
Formula used:
The present value of the instalments can be found using the formula for compound interest and equal instalments:
P = A/(1 + r)1 + A/(1 + r)2 + A/(1 + r)3
Calculation:
⇒ 25,220 = A/(1.05) + A/(1.05)2 + A/(1.05)3
⇒ 25,220 = A × [1/(1.05) + 1/(1.05)2 + 1/(1.05)3]
⇒ 25,220 = A × [0.9524 + 0.9070 + 0.8638]
⇒ 25,220 = A × 2.7232
⇒ A = 25,220 / 2.7232
⇒ A = ₹9,261
∴ The value of each instalment is ₹9,261.
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