Example 31: S borrows 5,00,000 to buy a house. If he pays equal instalments for 20 years and 10% interest on outstanding balance what will be the equal annual instalment?
Solution: We know​

$58.729

Explanation:

To find the answer, we need to use the present value of an annuity formula.

The formula is:

P = X [(1 - (1 + i)^-n) / i ]

Where X is the annual instalment

P is the present value of the investment (500,000 in this case)(

i is the interest rate (10% in this case)

and n is the number of periods (20 years in this case)

We now plug the amounts into the formula:

500,000 = X [ (1 - (1 + 0.10)^-20) / 0.10 ]

500,000 = X [8.51356]

500,000 / 8.51356 = X

58,729 = X

So the value of the equal annual instalment will be $58.729

d, conspicuous consumption is when you try to increase your wealth or social status (and in the case he's trying to create the perception of wealth considering he can't really afford it)

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