Question

A person bought a television set paying ₹ 20,000 in cash and promised to pay ₹ 1,000 at the end of every month for the next 2 years. If the money is worth 12% p.a. converted monthly, what is the cash price of the television set? 
[(1.01)^-24 = 0.7884]

Answer 1

C =  ₹ 1000,

n = 2 years = 24 months 

r = `12/12`= 1% per month 

`i=r/100=1/100=0.01` 

Present value `p=C/i[1-(1+i)^-n]`

=`1000/0.01[1 - (1 + 0.001)^-24]`

= `100000  [1 - (1.01)^-24]` 

=`100000   [1 - 0.7884]`  

=`1000000  [0.2116]` 

= Rs`21160` 

Cash price of television = 20000 + 21160 

                                =Rs 41160