Question

a man borrowed Rs.25000 at C.I at 8% pa. He has to repay the money in 20 equal annual installments. Find the value of each instalment if payment starts 3 years hence given:(1.08) power -2=0.8574,(1.08)power-22=0=1842​

Answer 1

The value of each instalment is Rs. 1435.18

Given:

Amount borrowed = Rs. 25,000

Rate of compound interest = 8% p.a

Number of equal annual instalments = 20

Number of years after which the payment starts = 3

To find:

Value of each instalment

Solution:

The formula for compound interest is given by

$A = P(1 + \frac{r}{n} )^{nt}$

where,

A = Final amount

P = Principal amount borrowed

r = Interest rate

n = Number of times interest is compounded per year

t = Number of years the money is borrowed for

In the given case, the final amount will be equal to the principal amount plus the interest that accrues over the 3 years before the first instalment is due. Therefore, we can use the formulae to calculate the final amount as follows:

A = 25000(1 + 0.08/1)^3 = Rs. 28703.68

Since the loan must be repaid in 20 equal annual instalments, we can divide the final amount by 20 to calculate the value of each instalment.

28703.68 / 20 = Rs. 1435.18

Hence, the value of each instalment is Rs. 1435.18

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