In a store, Arun has two options to buy a mobile phone, either he can pay the full amount of Rs.2,500 or he may buy at an instalment scheme, i.e. Rs.520 in down payment and four equal instalments, rate of interest being charged at 25% p.a. simple interest. Arun buys a mobile phone on the instalment scheme. What is the monthly instalment for Arun?
Show answer & explanation
Correct answer: D
Explanation
The correct answer is Option 4 i.e. Rs.520.
Cost Price of phone = Rs. 2500
Down Payment = Rs. 520
Loan Taken(P) = 2500 - 520 = Rs. 1980.
No. of installments (n)= 4
Rate (R)= 25% per annum = 25/1200 = 1/48 (monthly)
Simple interest = (P × r × t)/100 = (1980 × 25 × 4)/1200 = 165
Amount = 1980 + 165 = 2145
Let's assume that each installment is Rs 48.
| 48 | 48 | 48 | 48 |
| 48 × 1/48 = 1 | 48 × 2/48 = 2 | 48 × 3/48 = 3 |
So, sum = 48 + 48 + 48 + 48 + 1 + 2 + 3 = 198
198 = 2145
So, each installment = 2145/198 × 48 = 520