Indicom cell-phone is available for ₹ 2500 cash or ₹ 520 cash down payments followed by 4 equal monthly instalments. If the rate of interest charged is `25%` per annum, calculate the monthly instalment

Options

A. 520
B. 480
C. 550
D. none of these

Answer

To solve the problem of calculating the monthly installment for the Indicom cell-phone, we will follow these steps:

### Step 1: Determine the amount financed after the down payment
The cash price of the cell-phone is ₹2500, and the cash down payment is ₹520.

**Calculation:**
Amount financed = Cash price - Down payment
Amount financed = ₹2500 - ₹520 = ₹1980

### Step 2: Calculate the total interest for the financed amount
The rate of interest is given as 25% per annum. Since the installments are monthly, we need to convert this annual interest rate into a monthly interest rate.

**Calculation:**
Monthly interest rate = Annual interest rate / 12
Monthly interest rate = 25% / 12 = 2.0833% (approximately)

Now, we convert this percentage into a decimal for calculations:
Monthly interest rate = 2.0833 / 100 = 0.020833

### Step 3: Calculate the total amount to be paid back
The total amount to be paid back includes the principal amount and the interest on the principal over the 4 months.

**Calculation:**
Total interest for 4 months = Principal × Monthly interest rate × Number of months
Total interest = ₹1980 × 0.020833 × 4 = ₹165 (approximately)

Total amount to be paid back = Principal + Total interest
Total amount to be paid back = ₹1980 + ₹165 = ₹2145

### Step 4: Calculate the monthly installment
The total amount to be paid back will be divided into 4 equal monthly installments.

**Calculation:**
Monthly installment = Total amount to be paid back / Number of installments
Monthly installment = ₹2145 / 4 = ₹536.25

### Final Answer:
The monthly installment is approximately **₹536.25**.

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