Question

A TV set is available for ₹19,650 in cash or for ₹3,100 as a cash down payment and three equal annual instalments. If the shopkeeper charges interest at the rate of 10% per annum compounded annually, calculate the amount of each instalment.

• A. ₹9655
• B. ₹7655
• C. ₹6655
• D. ₹8655

Answer 1

Answer:

C. ₹6655

Cash price = ₹19,650
Down payment = ₹3,100

So, the amount financed is:

19,650-3,100=₹16,550

Let each annual instalment be ₹x.

At 10% compound interest, the present value of the three instalments is:

$\frac{x}{1.1}+\frac{x}{(1.1)^2}+\frac{x}{(1.1)^3}=16,550$

$x\left(\frac{1}{1.1}+\frac{1}{1.21}+\frac{1}{1.331}\right)=16,550$
$x(0.9091+0.8264+0.7513)=16,550$

$x\times2.4868=16,550$

Each annual instalment = ₹6,655