Discussion Forum

What annual payment will discharge a debt of Rs. 50,440 due in 3 years at 5% per annum compounded annually ?

Answer:

Explanation:

Let each installment = Rs. $a$

Debt Amount $=a[\left(\frac{100}{100+R}\right)$ $+\left(\frac{100}{100+R}\right)^{2}$ $+ ……………$ $+\left(\frac{100}{100+R}\right)^{T}]$

$\Rightarrow a[\left(\frac{100}{105}\right)$ $+\left(\frac{100}{105}\right)^{2}$ $+\left(\frac{100}{105}\right)^{3}]$ $=50,440$

$\Rightarrow a\times\frac{20}{21}\left[1+\frac{20}{21}+\frac{400}{441}\right]$ $=50,440$

$\Rightarrow a=50,440$ $\times\frac{441}{1,261}$ $\times\frac{21}{20}$ = Rs. 18,552.

$\therefore$ Annual payment = Rs. 18,552.