Vikram borrowed Rs 6,450 at 5 percent simple interest repayble in 4 equal installments. What will be the annual installment payable by him?
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Let the annual instalment be Rs. P.
Amount of ₹ 100 after 4 yr = 100 + (100 x 5 x 4)/100 = ₹ 120
∴ Present Value (PV) of ₹ 120 due after 4 yr = ₹ 100
Present Value (PV) of ₹ due after 4 yr = 100P/120 = 5P/6
Similary, PV of ₹ P due after 3 yr = 20P/23
PV of ₹ P due after 2 yr = 10P/11
PV of ₹ P due after 1 yr = 20P/21
∴ 5P/6 + 20P/23 + 10P/11 + 20P/11 = 6450
⇒ P = ₹ 1810
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