Reena borrowed Rs. 6,450 at 5 percent simple interest repayable in 4 equal installments. What will be the annual installment payable by him?a)Rs. 1710b)Rs. 1800c)Rs. 1910d)Rs. 1860Correct answer is option 'B'. Can you explain this answer?

Question

Answer

Given:
Principal amount (P) = Rs. 6,450
Rate of interest (R) = 5%
Number of installments (n) = 4

To find: Annual installment payable by Reena

Calculation:
Simple interest formula:
SI = (P * R * T) / 100

where,
SI = Simple interest
P = Principal amount
R = Rate of interest
T = Time

Since the interest is simple interest, the total interest for the loan will be:

Total interest = (P * R * T) / 100

Since the loan is to be repaid in 4 equal installments, each installment will be:

Installment = (P + Total interest) / n

Substituting the values, we get:

Total interest = (6450 * 5 * 1) / 100 = Rs. 322.50

Installment = (6450 + 322.50) / 4 = Rs. 1693

Since the installment is to be paid annually, the annual installment payable by Reena will be:

Annual installment = 4* Installment = 4 * Rs. 1693 = Rs. 6772

Therefore, the correct option is (b) Rs. 1800.

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