Chapter 6: Instalments

Example 2. A cooler is available for Rs. 2400 cash or for Rs. 1200 cash down payment and two monthly instalments of Rs. 610 each. Find the rate of interest charged under the instalment plan.

Solution:- Cash price = Rs. 2400

Cash down payment = Rs. 1200

Balance to be paid in instalment = Rs. 2400 - Rs. 1200
= Rs. 1200

Let rate of interest charged be r% p.a.

Interest

Amount = Rs. (1200 + 2r) ----------- (1)

First instalment of Rs.610

Paid after one month will at the end of second month amount to

The two monthly instalments taken together will at the end of two months amount to

From (1) and (2) we get

Or,

Or, (240r - 61r) / 120 = 20

Or

Or, r⁰ = (20 X 120)/179

= 13.41%

Rate of interest charged under instalment plan is 13.41% per annum.