What equal yearly installment will clear a debt of Rs. 1025 payable after 2 years, given a compound interest rate of 5%?

Explanation

Let the annual payment be Rs. x. The present value of two installments discounted at 5% compound interest is: x / (1.05) + x / (1.05)^2 = 1025 Solving this equation yields x = Rs. 551.25. Therefore, each yearly payment should be Rs. 551.25.