Question

A man borrows 10500 from a finance company and repays it in two equal annual instalments. If the rate of interest being compounded annually is 10% p.a., then find the value of each instalment.

• A. 6000
• B. 6050
• C. 6100
• D. 6150

Answer 1

Answer: (B)

Let the installment be $x$.

The value of first installment before $1$ year $=\frac{x}{1+\frac{10}{100}}=\frac{10x}{11}$

The value of first installment before $2$ years $=\frac{x}{(1+\frac{10}{100}{)}^2}=\frac{100x}{121}$

The sum of above values should be equal to principal.

$\frac{10x}{11}+\frac{100x}{121}=10500$

$x=6050$

Hence, this is the answer.