A man borrows ₹2,196 and agrees to return it with compound interest at the rate of 25% in three equal annual instalments at the end of the first, second and the third year. The amount of instalment (in ₹) is:

Correct option is A

Given:

Borrowed money = ₹2196

Rate of  interest =25%

Time = 3 years

Formula Used:

In case of compound interest

Borrowed money = $$\frac{x}{(1+\frac{r}{100})}+\frac{x}{(1+\frac{r}{100})^{2}}+\frac{x}{(1+\frac{r}{100})^{3}} ....$$​​

Solution:

​$$2196= \frac{x}{(1+\frac{25}{100})}+\frac{x}{(1+\frac{25}{100})^{2}}\frac{x}{(1+\frac{25}{100})^{3}}$$​​

​$$2196= \frac{x}{(1.25)}+\frac{x}{(1.25)^{2}}\frac{x}{(1.25)^{3}}$$​​

​$$2196 \times (1.25)^{3} = (1.25)^{2}x +1.25x +x$$​​

​$$x= ₹1125$$​​