What annual payment will discharge a debt of Rs. 1025 due in 2 years at the rate of 5% compound interest?  Pick: A) Rs. 560 B) Rs. 560.75 C) Rs. 551.25 D) Rs. 550 E) Rs. 560
Explanation:   Present worth of Rs. x due T years hence is given by   Present Worth (PW) = x/(1+R/100)T   Let x be the annual payment   Then, present worth of x due 1 year hence + present worth of x due 2 year hence = 1025   x(1 + 5/100)1 + x(1 + 5/100)2 = 1025 x/(21/20) + x/(21/20)2 = 1025   20x/21 + 400x/441 = 1025   820x/441 = 1025   x = (1025 × 441)/820   = (205 × 441)/164   = Rs. 551.25   Answer: Option Rs. 551.25
<result>C</result>
What annual payment will discharge a debt of Rs. 1025 due in 2 years at the rate of 5% compound interest?