A sum of ₹12,000 is to be paid in 2 equal annual installments at 5% simple interest per annum. Find the amount of each installment.
₹ 6,439.02
Let each installment be ₹x. Under simple interest, compare the total amount due with the value of the installments at the end of 2 years.
Amount due on ₹12,000 after 2 years = 12000 + 12000 × 5% × 2 = ₹13,200.
The first installment is paid after 1 year and earns interest for the remaining 1 year: x + x × 5% × 1 = 1.05x. The second installment is paid at the end: x.
So 1.05x + x = 13200, i.e. 2.05x = 13200, giving x = 13200 ÷ 2.05 = ₹6,439.02.
Hence, each installment is ₹ 6,439.02.
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