Question

If the Rs. 7500 taken at 8% compound interest is to be repaid in equal annual installment of 3 years, find the approximate annual installment.
1. Rs. 3013
2. Rs. 2867
3. Rs. 2728
4. Rs. 2910

Answer 1

Correct Answer - Option 4 : Rs. 2910

Given:

If the Rs. 7500 taken at 8% compound interest is to be repaid in equal annual installment of 3 years

Formula used:

P(1 + R/100)^T = x + x(1 + R/100) + x(1 + R/100)²................+ x(1 + r/100)^{(n – 1)} 

P = principal, R = rate per annum, T = time

Calculation:

Let be the each installment be Rs. x

According to the question,

⇒ 7500(1 + 8/100)³ = x + x(1 + 8/100) + x(1 + 8/100)²

⇒ 7500 × 1.08³ = x + 1.08x + 1.664x

⇒ 9447.84 = 3.2462x

⇒ x = 9447.48/3.2464

⇒ x = 2910(Approx)

∴ The approximate annual installment is Rs. 2910.