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Miscellaneous Exercise · Q14

Q.Shamshad Ali buys a scooter for Rs 22000. He pays Rs 4000 cash and agrees to pay the balance in annual instalment of Rs 1000 plus 10% interest on the unpaid amount. How much will the scooter cost him?

Delhi CbseNCERTSubjective· 3mImportance★★★★★
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The unpaid Rs 18000 is repaid in 18 yearly instalments of Rs 1000 principal plus 10% interest on the balance still owed; the interest amounts form a decreasing AP, and the total cost of the scooter (cash + instalments + interest) works out to Rs 39100.

The key idea is that interest here is charged only on the unpaid balance at the start of each year, a declining-balance arrangement, not compound interest and not a flat charge on the whole original loan.

Step 1, unpaid amount after the cash payment.

22000−4000=1800022000 - 4000 = 18000

Step 2, structure of each instalment.

Each year Shamshad pays Rs 1000 toward the principal, plus 10% interest on the balance still owed at the start of that year.

  • Year 1: balance is 1800018000, interest is 10% of 1800018000, i.e. 18001800
  • Year 2: balance is 18000−1000=1700018000-1000=17000, interest is 17001700
  • Year 3: balance is 1600016000, interest is 16001600
  • and so on, the balance dropping by Rs 1000 (and the interest by Rs 100) every year.

Step 3, how many years, and what the interest amounts look like.

The full Rs 18000 principal is paid off at Rs 1000/year, so it takes

n=180001000=18 yearsn = \dfrac{18000}{1000} = 18 \ \text{years}

The yearly interest amounts are 1800,1700,1600,…1800, 1700, 1600, \dots, an AP with first term a=1800a=1800, common difference d=−100d=-100, and 1818 terms, the last one being 10% of the final Rs 1000 balance, i.e. Rs 100.

Step 4, total interest paid, using the AP sum formula.

S18=182(1800+100)=9⋅1900=17100S_{18} = \dfrac{18}{2}(1800+100) = 9 \cdot 1900 = 17100 …

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