Multiple choice

A sum of Rs. 210 was taken as a loan. This is to be paid back in two equal annual installments. If the rate of interest is 10% per annum, then the value of each installment is

  1. Rs. 127

  2. Rs. 121

  3. Rs. 210

  4. Rs. 225
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Let installment be x. Present value = x/1.1 + x/(1.1)^2 = 210. x(1/1.1 + 1/1.21) = 210. x(1.1 + 1)/1.21 = 210. x(2.1/1.21) = 210. x = 121.

AI explanation

The present value of the loan equals the sum of the present values of the two equal installments, calculated using the formula P divided by (1 plus R divided by 100) raised to the power of n. Let each installment be x, so the equation is 210 equals x divided by 1.10 plus x divided by (1.10) squared. Combining the terms gives 210 equals 10x divided by 11 plus 100x divided by 121, which simplifies to 210 equals 210x divided by 121. Solving for x gives the value of each installment as Rs. 121.

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