Chapter 6: Instalments

Example 4. A.T.V can be purchased for Rs. 24000 cash or for Rs. 8000 cash down payment and six equal monthly instalment of Rs. 2800 each. Calculate the rate of interest charged under the instalment plan.

Solution:-

Cash price = Rs. 24000

Cash down payment = Rs. 8000

Balance to be paid in instalment = Rs. 24000 - Rs. 8000

= Rs. 16000

Let rate of interest be r% p.a.
At the end of 6 month, Rs.16000 will be amount to

At the end of 6 month, first instalment of Rs. 2800 will amount to

Second instalment of Rs.2800 will amount to

Third instalment of Rs.2800 will amount to

Fourth instalment of Rs.2800 will amount to

Fifth instalment of Rs.2800 will amount to

At the end of six months, all the six instalment will amount to

From (1) and (2) we get

Hence rate of interest charged is 17.78%