A sum of ₹ 11000 was taken as loan. This is to be paid in two equal annual installments. If the rate of interest be 20% compounded annually, then the value of each installment is

₹ 7500
₹ 7000
₹ 7100
₹ 7200

Correct Answer: ₹ 7200

Explanation:

Let value of each installment be ₹ N .
Then, N/(1 + 20/100) + N/(1 + 20/100)² = 11000
⇒ N(5/6 + 25/36) = 11000
⇒ N(56/36) = 11000
∴ N = ₹ 7200

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