A man borrows ₹2,100 and undertakes to pay it back with compound interest at 10% p.a. in two equal yearly instalments at the end of the first and second years. What is the amount of each instalment?

Explanation

Let each annual instalment be ₹A. Equating present values at 10% compound interest:

(A)/(1.1)+(A)/((1.1)^2)=2100.

Multiplying by 1.21:

1.1A+A=2541

2.1A=2541⇒ A=₹1210.