A has to pay Rs. 220 to B after 1 year. B asks A to pay Rs. 110 in cash and defer the payment of Rs. 110 for 2 years. A agrees to it. Counting the rate of interest at 10% per annum in this new mode of payment?

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A has to pay the P.W. of Rs. 220 due 1 year hence, which is
= Rs. [ (100 x 220) / {100 + (10 x 1)} ] = Rs. 200
A, actually pays = Rs. [110 + P.W. of Rs. 110 due 2 years hence]
= Rs. [ 110 + (100 x 110) / {100 + (10 x 2)} ]
= Rs. [110 + 91.66] = Rs. [201.66]
∴ A loses = Rs. [200 - 201.66] = Rs. 1.66

A has to pay Rs. 220 to B after 1 year. B asks A to pay Rs. 110 in cash and defer the payment of Rs. 110 for 2 years. A agrees to it. Counting the rate of interest at 10% per annum in this new mode of payment?

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