Chapter 6: Instalments

Instalments

Sometimes buyer is not able to purchase an article due to lack of money. Although they are in great need of the same. Businessmen starts selling their articles by installments. The purchaser need not to pay the entire amount at the time of purchase. A part of this is paid at the time of purchase and the rest is paid in easy installments may be monthly quarterly, half year or even annually. Flats and houses are also purchased in this scheme. some times loans are also returned to the bank or finance company by the installments.

ISNTALMENT BUYING (PURCHASE)

SCHEME:

Purchaser when pays whole amount of the article at the time of purchase it is called the cash price.

The part payment at the time of purchase done by the customer is called cash down payment.

Let us try some example to understand the problems:

Example 1. An electric iron is sold for Rs. 440 cash or for Rs. 200 cash down payment together with Rs. 244 to be paid after one month. Find the rate of interest charged is the instalment scheme.

Solution:- Cash price of the iron = Rs. 440

In the instalment plan,
Cash down payment = Rs. 200

The remaining price to be paid back in the instalment plane has to its present value = Rs. 440 - Rs. 200
= Rs. 240

The instalment paid at the end of one month = Rs. 244.

Interest charged on Rs. 240, for a period of one month = Rs. 244 - Rs. 240 = Rs. 4

Let rate of interest be r% p.a.

rate of interest charged under instalment plane = 20%.