Question

A person borrows ₹ 68962 on the condition that he will repay the money with compound interest at 5% per annum in 4 equal annual installments, the first one being payable at the end of the first year. Find the value of each installment.

Answer 1

V = `"A"/i [ 1 - (1 + i )^-n ]`

Here, V = 68962, n = 4, i = 0.05

68962 = `"A"/0.05 [ 1 - (1 + 0.05)^-4 ]`

68962 x 0.05 = `"A" [ 1 - ( 1.05)^-4 ]`

3448.1 = A (1 - 0.8227)

A = `3448.1/0.1773 = ₹ 19447`