A farmer buys a used tractor for Rs. 12000. He pays Rs. 6000 cash and agrees to pay the balance in annual instalments of Rs. 500 plus 12% interest on the unpaid amount. How much will the tractor cost him?
Answers
Cost of the tractor = Rs 12000
Find the loan amount:
Loan amount = cost of item - deposit
Loan amount = 12000 - 6000 = Rs 6000
Find the number of instalment needed:
Number of instalment = 6000 ÷ 500 = 12 years
Find the repayment:
1st Year = 500 + 0.12 x 6000 = Rs 1220
2nd year = 500 + 0.12 x 5500 = Rs 1160
3rd year = 500 + 0.12 x 5000 = Rs 1100
4th year = 500 + 0.12 x 4500 =Rs 1040
5th year = 500 + 0.12 x 4000 = Rs 980
6th year = 500 + 0.12 x 3500 = Rs 920
7th year = 500 + 0.12 x 3000 = Rs 860
8th year = 500 + 0.12 x 2500 = Rs 800
9th year = 500 + 0.12 x 2000 = Rs 740
10th year = 500 + 0.12 x 1500 = Rs 680
11th year = 500 + 0.12 x 1000 = Rs 620
12th year = 500 + 0.12 x 500 = Rs 560
Total instalment = 1120 + 1160 + 1100 + 1040 + 980 + 920 + 860 + 800 + 750 + 680 + 620 + 560 = Rs 10680
Total cost = 10680 + 6000 = Rs 16680
Answer: Rs 16680