Rahna decided to buy a scooter that cost ₹40,000. The shopkeeper agreed to sell the scooty under the condition of ₹25,000 cash down payment of ₹4,000 each month for four months. Find the rate of interest at which the shopkeeper sold the scooty under the installment scheme.
Show answer & explanation
Correct answer: A
Explanation
The correct answer is Option 1 i.e. 33%.
Given that,
Cash price = ₹40000
Cash down payment = ₹25000
Amount paid in monthly installment = ₹4000 × 4 = ₹16000
Now,
Interest charged = (25000 + 16000) - 40000 = ₹1000
Now,
Principal for first month = 40000 - 25000 = ₹15000
Principal for second month = 15000 - 4000 = ₹11000
Principal for third month = 11000 - 4000 = ₹7000
Principal for fourth month = 7000 - 4000 = ₹3000
Total principal = 15000 + 11000 + 7000 + 3000 = ₹36000
So,
Rate of interest on 36000 rupees = 1000 × 12 × (100/36000)
⇒ 100/3 = 33.33% = 33%