Question

A person bought a television set paying Rs 20,000 in cash and promised to pay Rs 1,000 at the end of every month for the next 2 years. If the money is worth 12% p.a. converted monthly, what is the cash price of the television set?
$\left[\right(1.01{)}^{-24}=0.7884]$

Answer 1

The monthly payment=Rs. $1000$ (c)

Duration $24$ months (n)

The rate$=12$% per annum, or $1$% per month

$i=\frac{r}{100}=0.01$

$\therefore$Present value$=\frac{c}{i}[1-{(1+i)}^{-n}]$

$=\frac{1000}{0.01}[1-{\left(1.01\right)}^{-24}]$

$=\frac{1000}{0.01}[1-0.7884]$

$=\frac{1000}{0.01}\times 0.2116$

=Rs. $21160$

Initial down payment=Rs. $20,000$

$\therefore$Total price=Rs. $41,160$