Multiple choice

What annual instalment will discharge a debt of Rs. 12000 due in 5 years at 10% simple interest?

  1. 1500

  2. 2400

  3. 2000

  4. 1200

  5. 1000
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Let each installment be x. Using the concept that each installment earns interest for the remaining period at 10% simple interest: Total amount = x + x(1 + 0.10×1) + x(1 + 0.10×2) + x(1 + 0.10×3) + x(1 + 0.10×4) = x(1 + 1.1 + 1.2 + 1.3 + 1.4) = x(6) = 12000. Therefore x = 2000.

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