Mr Kunal Dwivedi wants to buy a motorbike which is priced at Rs 45,500. The bike is also available at 25,000 down payment and monthly installments of Rs 1000 per month for 2 years or Rs 18,000 down payment monthly installment of Rs 1000 per month for 3 years.

Mr Kunal has with him only Rs 12,000. He wants to borrow the balance money of the down payment from a private lender whose terms are:

If Rs 6,000 is borrowed for 12 months, the rate of interest is 20 per cent. The interest will be calculated on the whole amount for the whole year, even though the repayment has to be done in 12 equal monthly installments starting from the first month itself. Thus he will have to repay an amount of Rs 600 per month for 12 months to repay Rs 6000 (Principal) – Rs 1200 (Interest (a 20 per cent). Rs. 10,000 upwards is borrowed for one year, the rate interest is 30 per cent and is calculated in exactly the same manner as above.

If Mr Kunal is ready to pay either of the down payments then which of the installment schemes is the better option of the two? (Assume that Mr Kunal will pay the installments out of his own earnings and he keeps his savings with himself and ears no interest on the same.) Also assume that instead of borrowing the remaining money for the down payment,he saves the balance before purchase.

(a) Rs 1000 for 2 years (b) Rs 2000 for 3 years

(c) either of two (d) Data inadequate

What is the percentage difference in the total amount

paid to the bike dealer, between the two installment

schemes (with respect to the total payment of the

scheme with Rs 25,000 down payment)?

(a) 10.2 %

(b) 13.5 %

(c) 11.4 %

(d) None of these

If kunal can spare only a total of Rs 2000 to be paid

monthly earnings starting from the first month on-

wards which scheme should he choose?

(a) Rs 1000 for 2 years (b) Rs 1000 for 3 years

(c) either of two (d) Data inadequate

Answers: (a)

(a)

(b)

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