Question

An article is available for rs.2500 cash for rs.520 cash down payments followed by 4 equal monthly installments. If the rate of interest is 25% per annum, calculate the monthly installment?

Answer 1

Answer:

550

Explanation:

Cost of the article = Rs 2500 (Given)

Cash down payment of the article = Rs 520 (Given)

Number of installments = 4 (Given)

Rate of interest = 25% = 25/12 = 2.08 per month. (Given)

Loan = 2500 - 520 = 1980

Thus, the buyer owes to the seller for first month = 1980

Let the installment amount be = x

For 2nd month = (1980 – x)

For 3rd month = (1980 – 2x)

For 4th month = (1980 – 3x)

Total principal for one month = [7920 – 6x]

Therefore,

Installment amount = P × R (1+R)^n

Hence the installment amount per month is Rs 550.