A farmer buys a used tractor for Rs 12000. He pays Rs 6000 cash and agrees to pay the balance in annual installments of Rs 500 plus 12% interest on the unpaid amount. How much will be the tractor cost him?

#### Solution

It is given that the farmer pays Rs 6000 in cash.

Therefore, unpaid amount = Rs 12000 – Rs 6000 = Rs 6000

According to the given condition, the interest paid annually is

12% of 6000, 12% of 5500, 12% of 5000, …, 12% of 500

Thus, total interest to be paid = 12% of 6000 + 12% of 5500 + 12% of 5000 + … + 12% of 500

= 12% of (6000 + 5500 + 5000 + … + 500)

= 12% of (500 + 1000 + 1500 + … + 6000)

Now, the series 500, 1000, 1500 … 6000 is an A.P. with both the first term and common difference equal to 500.

Let the number of terms of the A.P. be *n*.

∴ 6000 = 500 + (*n* – 1) 500

⇒ 1 + (*n* – 1) = 12

⇒ *n* = 12

Thus, total interest to be paid = 12% of (500 + 1000 + 1500 + … + 6000)

= 12% of 39000 = Rs 4680

Thus, cost of tractor = (Rs 12000 + Rs 4680) = Rs 16680