Mathematics
A T.V. can be purchased for ₹ 24000 cash or for ₹ 8000 cash down payment and six monthly instalments of ₹ 2800 each. Ali goes to market to buy a T.V., and he has ₹ 8000 with him. He has now two options. One is to buy TV under instalment scheme or to make cash payment by taking loan from some financial society. The society charges simple interest at the rate of 18% per annum simple interest. Which option is better for Ali?
Mathematical Modelling
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Answer
In installment scheme :
Cash down payment = ₹ 8000
Each monthly installment = ₹ 2800
So, total installment = ₹ 2800 × 6 = ₹ 16800.
So, total T.V. cost = ₹ 16800 + ₹ 8000 = ₹ 24800.
In loan system :
Cash down payment = ₹ 8000
Remaining amount = ₹ 24000 - ₹ 8000 = ₹ 16000
Now, ₹ 16000 at 18% per annum for 6 months or 0.5 year.
S.I. = = ₹ 1440.
So, total T.V. cost = ₹ 8000 + ₹ 16000 + ₹ 1440 = ₹ 25440.
Since, total cost is more in loan system.
Hence, six monthly installments scheme is better for Ali.
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