Three equal installment, each of Rs 500, were paid at the end of year on a sum borrowed at 10% compound interest compounded annually. Find the sum.
- 1239.7
- 1250.2
- 1500
- 1170.9
Anwer: (2) Solution: let’s say sum is 100. Then amount after 3 years = 100(1+0.1)^3 = 133.1 let’s say x is paid at the end of 1st year. Future value that is After 2 year value of x = (1+0.1)^2x = 1.21x then x is paid at the end of 2nd year. Future value that is After 1 year value of x = 1.1 x and at the end 3rd year again x So total future value of installments = (1.21+1.1+1)x = 3.31x hence 3.31x = 133.1 x = 133.1/3.31 = 40.2 But actual installment is 500 So actual sum is = (500/40.2)*100 = 1239.7
See our previous Quant question of the day:Quant Question Of The Day: 242
