Jyotsna buys a car for which she makes a down payment of Rs. 3,50,000 and the balance is to be paid in 3 years by monthly installments of Rs. 34,000 each. If the financer charges interest at the rate of 12% per annum and uses flat rate method, then the original price of the car is:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Rs. 12,50,000
Let the balance (the loan) be Rs. P. In the flat rate method, interest is charged on the whole loan for the whole period:
\( \displaystyle I=P\times\frac{12}{100}\times 3=0.36P \)
The loan and its interest are repaid in 3 × 12 = 36 instalments of Rs. 34,000:
\( \displaystyle P+0.36P=36\times 34000=1224000 \)
\( \displaystyle 1.36P=1224000 \)
\( \displaystyle P=900000 \)
\( \displaystyle \text{Price of the car}=350000+900000=1250000 \)
So the original price is Rs. 12,50,000.