2025 · Q58
An amount of ₹10,000 is borrowed at 10% per annum compound interest for 3 years, compounded annually, and paid back in 3 equal annual installments. What is each installment (approximately)?
Elementary MathematicsSimple and Compound Interest
- A₹4437
- B₹4237
- C₹4021
- D₹3811
Explanation
For equal annual installments, E = P*r(1+r)^n/((1+r)^n-1) = 10000*0.1*1.331/0.331, about Rs.4021. The formula equates the loan amount to the present value of the three payments. Using simple interest, or forgetting that each installment itself earns compound interest, gives the wrong options.