ON FINDING THE VALUE OF EACH INSTALMENT
EXAMPLE A state government announces sale offlats for Ks. 5,50,000 cash or Ks. 42750 cash down payment and three equal yearly instalments. The government also charges a nominal interest at the rate of 8% per annum compounded annually in this welfare scheme. If one purchases a flat under this instalment plan, calculate the value of each instalment.
SOLUTION Let each yearly instalment be of Rs= P
Cash price of flat = P.s. 5,50,000.
Cash down payment under instalment scheme = Rs. 42750.
Amount to be paid in instalments = Rs. 55000 — P.s. 42750
= Rs.507250.
Also, we have
R = Rate of interest =8% per annum compounded annually.
INSTALMENTS
n = Number of instalments 3.
Present value of all instalments =
But, the amount to be paid in instalments = Rs. 507250. [/latex]
Present value of all instalments = Amount to be paid in instalments
Hence, the value of each instalment is \( Rs. 196830 \)