A briefcase is available for Rs. 1600 cash or for Rs. 600 cash down payment and Rs. 1080 to be paid after 6 months. Find the rate of interest charged under the instalment plan.
SOLUTION : Let the rate of interest be R% per annum.
Cash price of briefcase = Rs. 1600
Cash down payment = Rs. 600
Balance due = Rs.1600-Rs.600 = Rs.1000
INSTALMENTS
n = Number of months 6.
Value of instalment = Rs. 1080
Now,
Amount of balance due = Value of instalment.
i.e. ( 1+nR/1200) B.D = Value of instalment
(1+6*R/1200)*1000 = 1080
= 1+R/200 = 1080/1000
= R/200
= 27/25-1
R/200= 2/25
R = 2*200/25 = 16
Hence, the rate of interest charged under instalment buying plan is 16% per annum.