A loan has to be returned in two equal yearly instalments of Rs. 42135 each.…

Given

• Each equal yearly instalment = Rs. 42135

• Rate of interest = 6% p.a., compounded annually

• Number of instalments = 2

Idea: The loan amount today equals the present value (PV) of all future instalments, discounted at the compound rate. Total interest = (sum of instalments paid) − (loan amount).

Step 1 — Present value of each instalment

First instalment (paid after 1 year):
PV₁ = 42135 ÷ 1.06 = Rs. 39750

Second instalment (paid after 2 years):
PV₂ = 42135 ÷ (1.06)² = 42135 ÷ 1.1236 = Rs. 37500

Step 2 — Loan amount (sum of present values)

Loan amount = PV₁ + PV₂ = 39750 + 37500 = Rs. 77250

Step 3 — Total amount repaid

Total repayment = 2 × 42135 = Rs. 84270

Step 4 — Total interest paid

Total interest = Total repayment − Loan amount = 84270 − 77250 = Rs. 7020

Hence, the total interest paid is Rs. 7020.