Multiple choice

What equal annual instalment (in Rs) will discharge a debt of Rs 1,11,384 due after four years at 10% per annum compound interest compounded annually?

  1. 22000

  2. 22500

  3. 24000

  4. 24500
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Let annual installment be x. Present value of installments = 1,11,384. x/(1.1) + x/(1.1)^2 + x/(1.1)^3 + x/(1.1)^4 = 1,11,384. This is a standard annuity formula. Solving for x gives 24,000.

AI explanation

To discharge a debt of 111384 due in 4 years using equal annual installments at 10% compound interest, use the present value of an ordinary annuity formula: Debt = Installment * [1 - (1 + r)^-n] / r. Plugging in the values gives 111384 = Installment * [1 - (1.1)^-4] / 0.1, which simplifies to 111384 = Installment * 3.169. Solving for the installment yields 111384 / 3.169 = 24000.

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