Multiple choice

What annual installment will discharge a debt of 1815 due in 3 years at 10% simple interest?

  1. 500

  2. 520

  3. 550

  4. 580
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Let the annual installment be x. The first installment earns interest for 2 years, the second for 1 year, and the third for 0 years. The total amount is x + (x + x*0.1*1) + (x + x*0.1*2) = 1815. This simplifies to 3x + 0.3x = 1815, so 3.3x = 1815, and x = 550.

AI explanation

Let the annual installment be x. The present value of the three installments at 10 percent simple interest must equal the debt of 1815. This gives the equation x/(1.1) + x/(1.2) + x/(1.3) = 1815, or 10x/11 + 5x/6 + 10x/13 = 1815. Solving this equation yields x equals 550.

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