What annual equal payment (in Rs) will discharge a debt of Rs. 28,700 due in 2 years at 5% p.a., interest compounded annually?

Correct option is B

Given:

Debt (Principal, P) = Rs. 28,700

Time (n) = 2 years

Rate of interest (r) = 5% p.a. (compounded annually)

Annual equal payment (A) = ?

Formula Used:

​​​$$\text{For } n = 2, \text{ each annual installment} \\ =\frac{P} { \frac{100}{100 + r} + \frac{100}{(100 + r)^2}}$$​​

Solution:  

From the formula;

​$$=\frac{28700} { \frac{100}{100 + 5} + \left(\frac{100}{100 + 5}\right)^2} \\ \ \\ = \frac{28700} { \frac{100}{10 5} +\left( \frac{100}{10 5}\right)^2}\\ \ \\ = \frac{28700 \times 21 \times 21} { 20 \times 41}\\ \ \\ = 35 \times 441 \\ \ \\ =15435$$​​

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