Multiple choice

X bought a TV costing 25,000 making down payment of Rs. 5000 and agreeing to make equal annual payment for four years. How much would be each payment if the interest on unpaid amount be 14% compounded annually? [P(4, 0.14) = 2.91731]

  1. Rs. 6855.63

  2. Rs. 6850.63

  3. Rs. 6859

  4. Rs. 6871
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A Correct answer
Explanation

The amount to be financed is 25000 - 5000 = 20000. Using the annuity formula P = A * P(n, i), where P is the principal, A is the annual payment, and P(4, 0.14) is the present value factor, A = 20000 / 2.91731 = 6855.63.

AI explanation

The outstanding principal is 25000 minus 5000, which equals 20000. Using the present value of annuity formula, we divide this balance by the given annuity discount factor: 20000 divided by 2.91731. The calculation yields 20000 divided by 2.91731 equals 6855.63. Each payment is Rs. 6855.63.

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