Question

Mr. X purchased a car on Hire purchase system. The total cash price of car payable is Rs.8000 as down payment and thereafter the instalments of Rs. 6,000, Rs.5,000 and Rs.2000 payable at the end of 1st, 2nd and 3rd year respectively. Interest charged at 5% PA. Calculate the cash price.
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Answer 1

Answer:

cash price=₹20,262.81

Answer 2

Given:

Mr X purchased a car on the Hire purchase system. The total cash price of the car payable is Rs.8000 as a down payment and thereafter the EMI of Rs. 6,000, Rs.5,000 and Rs.2000 payable at the end of 1st, 2nd and 3rd year respectively. Interest charged at 5% PA.

To Find:

Calculate the cash price

Solution:

EMI                Discounting factor               Present value

1) 6000                           0.9523                              5713.8

2) 5000                            0.9070                             4535

3) 2000                            0.8638                             1727.6

                                                              TOTAL       11976.4

Cash price of car= sum of present value + down payment

                            =Rs19976.4

                            =Rs 19980 (rounding off)

The discounting factor of 5% is as follows,

$1st year=\frac{1}{(1+0.05)^1}\\ =0.9523\\2nd year=\frac{1}{(1+0.05)^2}\\ =0.9070\\3rd year=\frac{1}{(1+0.05)^3}\\ =0.8638$

Hence, the cash price of the car is Rs 19980.