Question

Mr X purchased a house for ₹ 5,00,000. He agrees to pay for the house
in 10 equal instalments at the end of each year. If money worths 8%
effective. What would be the size of each instalment?
(i) If instalment is paid at the end of each year.
(ii) If instalment is paid in the beginning of each year.
(iii) if the first instalment to begin after three years from now.
(iv) What happens in above three cases, if Mr X makes a down payment
of ₹ 1,00,000.

Answer 1

Given :  Mr X purchased a house for ₹ 5,00,000. He agrees to pay for the house  in 10 equal instalments at the end of each year. If money worths 8%  effective.

To Find :  Size of each instalment

i) If instalment is paid at the end of each year.

(ii) If instalment is paid in the beginning of each year.

(iii) if the first instalment to begin after three years from now.

(iv) What happens in above three cases, if Mr X makes a down payment

of ₹ 1,00,000.

Solution:

EMI Formula = [P x (R/100) x (1+(R/100)ⁿ]/[(1+(R/100)ⁿ-1]

P = 50000

R = 8 %

n = 10

=> EMI  =  [ 500000 x (8/100) x (1 + 8/100)¹⁰]/ (  (1 + 8/100)¹⁰ - 1)

= 7,4514.7

If installment is paid in the beginning of each year.

Let say E is the installment then

P = 500000 - E

n = 9

=> E  =  [ (500000-E) x (8/100) x (1 + 8/100)⁹]/ (  (1 + 8/100)⁹ - 1)

=> E = (50000 - E) (0.16)

=> E = 6,8965.5

if the first installment to begin after three years from now.

50000 will be at the end of two years/beginning of 3rd year  = 500000(1.08)²

Now we can use 1st case using 50000(1.08)²  instead of 50000

EMI  =  [ 500000 x(1.08)²   x (8/100) x (1 + 8/100)¹⁰]/ (  (1 + 8/100)¹⁰ - 1)

= 86914

in above three cases, if Mr X makes a down payment  of ₹ 1,00,000.

P will be reduced by 100000

so use 400000 instead of 500000

Case 1 : 59612

Case 2 : 55172

Case 3: 69531

Learn More:

I. A family buys a house worth $326,000. They pay $75,000 deposit ...

https://brainly.in/question/18063432

an overdraft of rupees 50,000 has to be paid back in annual equal ...

https://brainly.in/question/12967798