Let the instalment be x:
Now, the first instalment would earn interest for a period of 3 years, similarly the second for 2 years, the third for a year and the fourth would none.
Thus,
x(1.12)^3+x(1.12)^2+x(1.12)+x=2360
Now, solving for x gives approximately 500.

Would be great, if someone could share a quicker method.

Thanks

c) 874

Interest per year : 12 %

Total amount due in 4 years : 2360 + 2360 * 4 * 12/100 = 2360 * 148 / 100

Amt each year = 2360 * 148 / 4 * 100

873.2 ~ 874

pankajks2010 wrote:Let the instalment be x:
Now, the first instalment would earn interest for a period of 3 years, similarly the second for 2 years, the third for a year and the fourth would none.
Thus,
x(1.12)^3+x(1.12)^2+x(1.12)+x=2360
Now, solving for x gives approximately 500.

Would be great, if someone could share a quicker method.

Thanks

Dint think of it this way! But again, I am not sure the calc is right.

OA is pointing 500.. 874 is what I got too..It was not in the original options but I replaced it

Our approach is wrong...

Pankaj has to explain more..

Ah! then that method is right. Gotta run now, will work on it again.

On second thoughts,

are you telling me that paying 500 for 4 years, that is total of 2000, is enough to discharge a debt of 2360 plus interest for 4 years? That doesnt work!

@Vineeshp: Money makes money by earning interest..So, its not as simple as 500*4=2000
To elaborate: if you make me a payment of 500 at the end of first year..I'll invest that somewhere for 3 years to earn interest..similarly, your second instalment & third instalments would also earn interest..but, not the fourth, because as & when you pay that your term gets over.

@HSPA: Pankaj is explaining more

Now, lets get specific to the question:
Lets assume that the instalment amount is X.
Now, as per the question, one has to pay 4 instalments. The loan gets over as & when you pay the fourth one.
-----after 1 year you pay X-----2nd year you paid X-----3rd year your paid X----fourth year, paid X

and the total of all these payments frees you from the debt

Now, the first instalment that you paid, would earn interest for a period of 3 years (in an ideal world that is what happens, that is how, the whole banking system makes money, although they do a hell lot of other things as well and land us into recession )

Similarly, your second & third instalments would earn interests for the lender. the fourth won't earn any interest.

Which, in mathematical term simplifies to:
x(1.12)^3+x(1.12)^2+x(1.12)+x=2360

Now, its a pain to simplify for x in this equation. That's why I am hoping for the experts to discuss some less calculation intensive method.

Big big mistake: It was actually a question of commonsense.

No calculation required at all...well, the debt to be paid is 2360.

Now, options b,c & d get automatically cancelled. Why because, if these options are multiplied by 4, the total amount paid back would be >=2360. Thus, these can never be the instalment amount as there is interest as well to be considered..

pankajks2010 wrote:
@HSPA: Pankaj is explaining more

Now, lets get specific to the question:
Lets assume that the instalment amount is X.
Now, as per the question, one has to pay 4 instalments. The loan gets over as & when you pay the fourth one.
-----after 1 year you pay X-----2nd year you paid X-----3rd year your paid X----fourth year, paid X

and the total of all these payments frees you from the debt

Now, the first instalment that you paid, would earn interest for a period of 3 years (in an ideal world that is what happens, that is how, the whole banking system makes money, although they do a hell lot of other things as well and land us into recession )

Similarly, your second & third instalments would earn interests for the lender. the fourth won't earn any interest.

therefore after the end of 1st year amount paid would be x+ simple interest of 3 year@12% p.a.= x+(x*12*3)/100=1.36x
similarly for second year it would be 1.24x and for third year it would be 1.12x and for last year it would be x
therefore we have 1.36x+1.24x+1.12x+x=2360
4.72x=2360;
x=500;


PS: pankaj your concept was right but application was wrong...!!!

vineeshp wrote:On second thoughts,

are you telling me that paying 500 for 4 years, that is total of 2000, is enough to discharge a debt of 2360 plus interest for 4 years? That doesnt work!

Dude, because of your above post, I realized that we don't even need to make any equation to solve this question. Big thanks Vineeshp!!

@Manp: Yes, I agree that I employed CI whereas the question explicitly mentions SI. Thanks!!