What annual payment will discharge a debt of Rs. 1025 due in 2 years at the rate of 5% compound interest?

A. Rs. 550
B. Rs. 551.25
C. Rs. 560
D. Rs. 560.75

Explanation:

Let each installment be Rs. x. Then,

x/(1 + 5/100) + x/(1 + 5/100)² = 1025
820x + 1025 * 441
x = 551.25
So, value of each installment = Rs. 551.25

Correct Answer: Rs. 551.25 ✔

Last Updated: February 07, 2020