A man borrows a loan of Rs 20,000 from a merchant at the rate of interest 1% per month for two month. If merchant wants to receive the money with interest in two equal installment. Then his installment will be

• Assume P to be the principal and r the rate of interest.
  
  Step 1: P(1+r/100)=P1 (Amount for one year)
  Step 2: New Principal
  Now let X be the first installment.
  After giving the first installment, the principal value will change and the new principal will be = P1 – X
  P2 = P1 –X (1+R/100)
  Step 3: Amount and Interest for the second year
  Now the interest charged will be charged on this amount.
  Amount at the end of second year: [P(1+r/100)-X][1+r/100] Step 4: Since the installments are equal, this new amount has to equal X.
  Hence,
  [P(1+r/100)-X][1+r/100]=X
  On solving, we have
  P [(1+R/100)2-X (1+R/100)] = X
  P [(1+R/100)2] = X+X (1+R/100)
  Divide both sides by (1+r/100)2
  So we left with
  P= X/(1+r/100)2 + X/(1+r/100)
  Now putting the value of P = 20000 and r = 1
  we get the value of X is 10150.2487 = 10150.25
• 9 years agoHelpfull: Yes(3) No(0)