Question

A watch is sold for $Rs.960$ cash or for $Rs.480$ cash down payment and two monthly instalment of $Rs.245$ each. Find the rate of interest charged under the instalment plane.

Answer 1

Cash price of watch $=Rs.960$

Cash down payment $=Rs.480$
Balance due $=960-480=Rs.480$
Total payment $=245\times 2=Rs.490$
Total interest paid in instalment
$=Rs.490-Rs.480$
$=Rs.10$
Principal for $1st$ month $=Rs.480$
Principal for $2nd$ month $=Rs.480-245$
$=Rs.235$
Total principal for $1month=Rs.480+Rs.235=Rs.715$
$\therefore$ Rate of interest in instalment
$=\frac{Interest\times 100}{Principal\times time}=\frac{10\times 100}{715\times 1/12}$
$=\frac{1000\times 12}{715}=16.78$%.