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Raghav buys a shop for ₹ 120000. He pays half of the amount in cash and agrees to pay the balance in 12 annual instalments of ₹ 5000 each. If the rate of interest is 12% and he pays the interest due on the unpaid amount with the instalment. Find the total cost of the shop.
  • a)
    ₹156800
  • b)
    ₹156700
  • c)
    ₹165200
  • d)
    ₹166800
Correct answer is option 'D'. Can you explain this answer?
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Most Upvoted Answer
Raghav buys a shop for 120000. He pays half of the amount in cash and...
Given:
Cost of the shop = Rs. 120000
Amount paid in cash = Rs. 60000
Balance amount = Rs. 60000

Rate of interest = 12%
Number of annual instalments = 12
Amount of each instalment = Rs. 5000

To find:
Total cost of the shop

Calculation:
1. Interest on the unpaid amount:
The unpaid amount is Rs. 60000. The interest rate is 12%. So, the interest on the unpaid amount can be calculated using the formula: Interest = (Principal * Rate * Time) / 100
Here, Principal = Rs. 60000, Rate = 12%, and Time = 1 year.
So, the interest = (60000 * 12 * 1) / 100 = Rs. 7200

2. Total amount paid in instalments:
Number of instalments = 12
Amount of each instalment = Rs. 5000
So, the total amount paid in instalments = Number of instalments * Amount of each instalment
= 12 * 5000 = Rs. 60000

3. Total cost of the shop:
The total cost of the shop can be calculated by adding the amount paid in cash, the interest on the unpaid amount, and the total amount paid in instalments.
Total cost of the shop = Amount paid in cash + Interest on unpaid amount + Total amount paid in instalments
= 60000 + 7200 + 60000
= Rs. 127200

Therefore, the total cost of the shop is Rs. 127200, which is not mentioned in the given options.
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Community Answer
Raghav buys a shop for 120000. He pays half of the amount in cash and...
Amount paid in cash =
Remaining amount = ₹ (120000 – 60000) = ₹ 60000
Amount of 1st instalment

Amount of 2nd instalment

Amount of 3rd instalment

Total amount paid = ₹ 12200 + ₹ 11600 + ₹ 11000 + ... (12 instalments)
which form an A.P. with number of terms,
n = 12, a = 12200 and d = – 600

∴ Total cost of the shop = ₹ 60000 + ₹ 106800 = ₹ 166800
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Read the source given below and answer the questions that follows:Banks use the major portion of the deposits to extend loans. There is a huge demand for loans for various economic activities. Banks make use of the deposits to meet the loan requirements of the people. In this way, banks mediate between those who have surplus funds (the depositors) and those who are in need of these funds (the borrowers). Banks charge a higher interest rate on loans than what they offer on deposits. A large number of transactions in our day-to-day activities involve credit in some form or the other. Credit (loan) refers to an agreement in which the lender supplies the borrower with money, goods or services in return for the promise of future payment. In rural areas, the main demand for credit is for crop production. Crop production involves considerable costs on seeds, fertilisers, pesticides, water, electricity, repair of equipment, etc. The various types of loans can be conveniently grouped as formal sector loans and informal sector loans. Among the former are loans from banks and cooperatives. The informal lenders include moneylenders, traders, employers, relatives and friends, etc. The Reserve Bank of India supervises the functioning of formal sources of loans. For instance, we have seen that the banks maintain a minimum cash balance out of the deposits they receive. The RBI monitors the banks in actually maintaining cash balance. There is no organisation which supervises the credit activities of lenders in the informal sector. They can lend at whatever interest rate they choose. There is no one to stop them from using unfair means to get their money back. Compared to the formal lenders, most of the informal lenders charge a much higher interest on loans. Thus, the cost to the borrower of informal loans is much higher. In recent years, people have tried out some newer ways of providing loans to the poor. The idea is to organise rural poor, in particular women, into small Self-Help Groups (SHGs) and pool (collect) their savings.Answer the following MCQs by choosing the most appropriate optionQ. Compared to the formal lenders, most of the informal lenders charge a much ................... interest on loans

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Raghav buys a shop for 120000. He pays half of the amount in cash and agrees to pay the balance in 12 annual instalments of 5000 each. If the rate of interest is 12% and he pays the interest due on the unpaid amount with the instalment. Find the total cost of the shop.a)156800b)156700c)165200d)166800Correct answer is option 'D'. Can you explain this answer?
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