Let the annual instalment be Rs. 100. The first instalment will be paid ONE year from now i.e. 3 years before it is actually DUE. The second instalment will be paid TWO years from now i.e. 2 years before it is actually due.

The third instalment will be paid 1 year before it is actually due.

The fourth instalment will be paid on the day the AMOUNT is actually due.

On the first instalment the interest will be paid for 3 years, on the second for 2 years, on the third for 1 year, on the fourth for 0 year. In total an interest for 6 years will be paid (3 + 2 + 1 + 0) on Rs. 100 @ 10%. Interest = (100 × 6 × 10)/100 = Rs. 60 and the principal is Rs 100 × 4 = Rs 400. The total loan that can be discharged is Rs. 400 + 60 = Rs. 460. Here the technique of Chain Rule will be applied. I.e. for Rs. 460 the instalment required is Rs. 100, for Rs. 4600 the instalment required is 4600 × 100/460 = Rs. 1000.

Let the annual instalment be Rs. 100. The first instalment will be paid one year from now i.e. 3 years before it is actually due. The second instalment will be paid two years from now i.e. 2 years before it is actually due.

The third instalment will be paid 1 year before it is actually due.

The fourth instalment will be paid on the day the amount is actually due.

On the first instalment the interest will be paid for 3 years, on the second for 2 years, on the third for 1 year, on the fourth for 0 year. In total an interest for 6 years will be paid (3 + 2 + 1 + 0) on Rs. 100 @ 10%. Interest = (100 × 6 × 10)/100 = Rs. 60 and the principal is Rs 100 × 4 = Rs 400. The total loan that can be discharged is Rs. 400 + 60 = Rs. 460. Here the technique of Chain Rule will be applied. I.e. for Rs. 460 the instalment required is Rs. 100, for Rs. 4600 the instalment required is 4600 × 100/460 = Rs. 1000.