Question

What annual payment will discharge a debt of Rs.808 due in 2 years at 2% per annum ?
a. 200
b. 300
c. 400
d. 350

Answer 1

so u need to pay 2% of 808 for first year
and pay 2%of (2% of 808) for second year

Answer 2

compound interest, right?
\(\Large A =P (1+(1+r)^n)\)

Answer 3

A=808
r = 0.02
n=2
find P

Answer 4

hehe i dont memorize i just analyze them :)

Answer 5

why are'nt you using simple interest

Answer 6

like A = P(1+rn) ?

Answer 7

i=pr%t

Answer 8

ok, what answer does it give you ?

I use compound Interest, because I assume,
the rate of interest applies on new amount after every year...

Answer 9

book is giving \(400\)

Answer 10

with compound Interest we are getting 396

Answer 11

suppose M is the required yearly payment

Answer 12

808 in 2 years is same as 808/(1+0.02)^2 now

so you want this amount to vanish to 0 by making a payment of M each year

Answer 13

balance after 1 year :
\[\dfrac{808}{(1+0.02)^2}(1+0.02) - M\]

Answer 14

balance after two years :
\[\left[\dfrac{808}{(1+0.02)^2}(1+0.02) - M\right](1+0.02) -M\]

Answer 15

you want this balance to equal 0 as you're closing the loan
set it equal to 0 and solve M

Answer 16

http://www.wolframalpha.com/input/?i=solve+%28%28808%2F%281%2B0.02%29%5E2%29%281%2B0.02%29+-+M%29%281%2B0.02%29+-+M+%3D+0

Answer 17

thnx both

btw which concept are u using for this

can u give a link