Multiple choice

A refrigerator costs Rs. 1,08,000. After making a down payment of Rs. 20,000, the remaining amount is financed at an annual interest rate of 9% to be repaid over 4 equal quarterly instalments. What is the quarterly instalment amount (to the nearest hundreds integer)?

  1. Rs. 20,200

  2. Rs. 22,800

  3. Rs. 23,200

  4. Rs. 23,800
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Principal = 108,000 - 20,000 = 88,000. Quarterly rate = 9%/4 = 2.25% = 0.0225. Using EMI formula P = A * [1 - (1+r)^-n] / r. 88,000 = A * [1 - (1.0225)^-4] / 0.0225. 88,000 = A * [1 - 0.9145] / 0.0225. 88,000 = A * 3.802. A = 88,000 / 3.802 = 23,145. Nearest hundred is 23,100 or 23,200.

AI explanation

The financed amount is 108000 minus 20000, which equals 88000. Using the present value of annuity formula with a quarterly interest rate of 9% divided by 4, or 0.0225, and 4 periods, the installment equals 88000 multiplied by 0.0225 divided by the quantity 1 minus 1.0225 to the power of negative 4. The denominator evaluates to 0.08536, and dividing 1980 by 0.08536 yields a quarterly installment of 23191.93, which rounds to Rs. 23,200.

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