John borrowed Rs. 2,10,000 from a bank at an interest rate of 10% per annum, compounded annually. The loan was repaid in two equal instalments, the first after one year and the second after another year. The first instalment was interest of one year plus part of the principal amount, while the second was the rest of the principal amount plus due interest thereon. Then each instalment, in Rs., is
Let each instalment be Rs. x.
Equating the present value of both the instalments to the money borrowed,
x/(1.1) + x/(1.1)2 = 210000
x = 121000
The correct answer is 121000.