Question

A scooter is sold for Rs.$28,000$ cash or for Rs.$7,400$ cash down payment together with three equal monthly instalment of Rs. $7,000$ each. Find the rate of interest charged under the instalment plan.

Answer 1

Cash price of the scooter$=Rs.28,000$
Cash down payment$=Rs.7,400$
Balance price to be paid the instalments$=Rs.28,000-7,400$
$=Rs.20,600$
Amount paid in $3$ equal monthly instalment$=7,000\times 3$
$=21,000$
Total payment$=7,400+21,000$
$=28,400$
Interest paid in instalment scheme$=28,400-28,000$
$=400$
Principal amount for the $1$st month $=Rs.20,600$
Principal amount for the $2$nd month $=20,600-7,000=Rs.13,600$
Principal amount for the $3$rd month $=13,600-7,000=Rs.40,800$
Rate if interest$=\frac{400\times 100\times 12}{40,800\times 1}$
$=11.76\%$
Thus, the rate of interest charged under instalment scheme is $11.76\%$.