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A sum of rupees 11200 is paid back in 4 yearly installments. How much is the sum of all installment, if the interest is compounded annually on the balance at 8% per annum and is to be included in each installment?

A sum of rupees 11200 is paid back in 4 yearly installments. How much is the sum of all installment, if the interest is compounded annually on the balance at 8% per annum and is to be included in each installment? Correct Answer 13440

Calculation:

The sum is to be paid in 4 monthly installments

Each installment = 11200 / 4 = 2800

Amount payable at the end of first year A1 = 2800 + (8% of 11200) = 3696

A2 = 2800 + (8% of (11200 – 2800)) = 3472

A3 = 2800 + (8% of (8400 – 2800)) = 3248

A4 = 2800 + (8% of (5600 – 2800)) = 3024

∴ Total sum = 3696 + 3472 + 3248 + 3024 = 13440

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