A man borrows Rs. 1820 and undertakes to pay back with compound interest @ 20% p.a. in 3 equal yearly installments at the end of first, second and third years. What is the amount of each installment?
Rs. 545
Rs. 750
Rs. 850
Rs. 864
Explanation:
Here, (1 + r) = 1 + 15=6515=65
Ratio of principals for three years = 1 : 56:(56)256:(56)2
= 6262 : 6 x 5 : 5252 (On multiplying each ratio by 6262)
= 36 : 30 : 25
Sum of the ratios = 36 + 30 + 25 = 91
Principal of first installment = 36913691 x 1820 = Rs. 720
Therefore, Installment = Principal of first installment x (1 + r)
= 720 x 6565 = Rs. 864
Here, (1 + r) = 1 + 15=6515=65
Ratio of principals for three years = 1 : 56:(56)256:(56)2
= 6262 : 6 x 5 : 5252 (On multiplying each ratio by 6262)
= 36 : 30 : 25
Sum of the ratios = 36 + 30 + 25 = 91
Principal of first installment = 36913691 x 1820 = Rs. 720
Therefore, Installment = Principal of first installment x (1 + r)
= 720 x 6565 = Rs. 864