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Dr. M. I. Rajpoot wants to buy an air-conditioner for his family. He went to a shop and selects an AC whose price is Rs. 12,700. The shopkeeper gave him two offers either you pay the full amount of Rs. 12,700 or pay only Rs. 4,000 and installment of Rs. 3000 per month for next 3 months just paying only Rs. 300 as interest. What is the rate of interest the shopkeeper charged Rajpoot? Why interest is not calculated at month level?
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Dr. M. I. Rajpoot wants to buy an air-conditioner for his family. He w...
Rate of Interest Calculation for AC Purchase
Introduction:
Dr. M. I. Rajpoot is considering buying an air-conditioner for his family. He has two payment options available to him. The first option is to pay the full amount of Rs. 12,700 upfront, and the second option is to pay Rs. 4,000 upfront and the remaining amount in three equal installments of Rs. 3,000 per month, with an additional interest charge of Rs. 300.
Calculating the Rate of Interest:
To determine the rate of interest charged by the shopkeeper, we need to calculate the effective rate of interest for the second payment option.
Step 1: Calculate the total amount paid:
Under the second payment option, Dr. Rajpoot pays Rs. 4,000 upfront and three installments of Rs. 3,000 each. Therefore, the total amount paid can be calculated as follows:
Total amount paid = Rs. 4,000 + (3 * Rs. 3,000) = Rs. 4,000 + Rs. 9,000 = Rs. 13,000
Step 2: Calculate the interest charged:
The interest charged by the shopkeeper is Rs. 300.
Step 3: Calculate the principal amount:
To calculate the principal amount, we subtract the interest charged from the total amount paid:
Principal amount = Total amount paid - Interest charged
= Rs. 13,000 - Rs. 300
= Rs. 12,700
Step 4: Calculate the rate of interest:
To calculate the rate of interest, we use the formula:
Rate of interest = (Interest charged / Principal amount) * 100
Rate of interest = (Rs. 300 / Rs. 12,700) * 100
= 2.36%
Hence, the shopkeeper charged Dr. Rajpoot a rate of interest of approximately 2.36% for the AC purchase.
Explanation for Calculating Interest at the Total Level:
The interest for the AC purchase is calculated at the total level because it simplifies the calculation process and provides a clear and straightforward understanding of the overall cost of the purchase. Considering the interest at the monthly level would complicate the calculation and confuse the buyer.
Advantages of Calculating Interest at the Total Level:
1. Simplified Calculation: Calculating the interest at the total level eliminates the need for complex calculations at each monthly installment.
2. Clear Understanding: By calculating the interest at the total level, the buyer can easily understand the total cost of the purchase without getting confused by monthly interest rates.
3. Transparent Pricing: Displaying the total interest amount upfront allows the buyer to make an informed decision regarding the payment option, as they can see the overall cost associated with each option.
In conclusion, the shopkeeper charged Dr. Rajpoot a rate of interest of approximately 2.36% for the AC purchase. Calculating the interest at the total level simplifies the calculation process and provides a clear understanding of the overall cost of the purchase.
Introduction:
Dr. M. I. Rajpoot is considering buying an air-conditioner for his family. He has two payment options available to him. The first option is to pay the full amount of Rs. 12,700 upfront, and the second option is to pay Rs. 4,000 upfront and the remaining amount in three equal installments of Rs. 3,000 per month, with an additional interest charge of Rs. 300.
Calculating the Rate of Interest:
To determine the rate of interest charged by the shopkeeper, we need to calculate the effective rate of interest for the second payment option.
Step 1: Calculate the total amount paid:
Under the second payment option, Dr. Rajpoot pays Rs. 4,000 upfront and three installments of Rs. 3,000 each. Therefore, the total amount paid can be calculated as follows:
Total amount paid = Rs. 4,000 + (3 * Rs. 3,000) = Rs. 4,000 + Rs. 9,000 = Rs. 13,000
Step 2: Calculate the interest charged:
The interest charged by the shopkeeper is Rs. 300.
Step 3: Calculate the principal amount:
To calculate the principal amount, we subtract the interest charged from the total amount paid:
Principal amount = Total amount paid - Interest charged
= Rs. 13,000 - Rs. 300
= Rs. 12,700
Step 4: Calculate the rate of interest:
To calculate the rate of interest, we use the formula:
Rate of interest = (Interest charged / Principal amount) * 100
Rate of interest = (Rs. 300 / Rs. 12,700) * 100
= 2.36%
Hence, the shopkeeper charged Dr. Rajpoot a rate of interest of approximately 2.36% for the AC purchase.
Explanation for Calculating Interest at the Total Level:
The interest for the AC purchase is calculated at the total level because it simplifies the calculation process and provides a clear and straightforward understanding of the overall cost of the purchase. Considering the interest at the monthly level would complicate the calculation and confuse the buyer.
Advantages of Calculating Interest at the Total Level:
1. Simplified Calculation: Calculating the interest at the total level eliminates the need for complex calculations at each monthly installment.
2. Clear Understanding: By calculating the interest at the total level, the buyer can easily understand the total cost of the purchase without getting confused by monthly interest rates.
3. Transparent Pricing: Displaying the total interest amount upfront allows the buyer to make an informed decision regarding the payment option, as they can see the overall cost associated with each option.
In conclusion, the shopkeeper charged Dr. Rajpoot a rate of interest of approximately 2.36% for the AC purchase. Calculating the interest at the total level simplifies the calculation process and provides a clear understanding of the overall cost of the purchase.
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Dr. M. I. Rajpoot wants to buy an air-conditioner for his family. He went to a shop and selects an AC whose price is Rs. 12,700. The shopkeeper gave him two offers either you pay the full amount of Rs. 12,700 or pay only Rs. 4,000 and installment of Rs. 3000 per month for next 3 months just paying only Rs. 300 as interest. What is the rate of interest the shopkeeper charged Rajpoot? Why interest is not calculated at month level?
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Dr. M. I. Rajpoot wants to buy an air-conditioner for his family. He went to a shop and selects an AC whose price is Rs. 12,700. The shopkeeper gave him two offers either you pay the full amount of Rs. 12,700 or pay only Rs. 4,000 and installment of Rs. 3000 per month for next 3 months just paying only Rs. 300 as interest. What is the rate of interest the shopkeeper charged Rajpoot? Why interest is not calculated at month level? for GMAT 2025 is part of GMAT preparation. The Question and answers have been prepared according to the GMAT exam syllabus. Information about Dr. M. I. Rajpoot wants to buy an air-conditioner for his family. He went to a shop and selects an AC whose price is Rs. 12,700. The shopkeeper gave him two offers either you pay the full amount of Rs. 12,700 or pay only Rs. 4,000 and installment of Rs. 3000 per month for next 3 months just paying only Rs. 300 as interest. What is the rate of interest the shopkeeper charged Rajpoot? Why interest is not calculated at month level? covers all topics & solutions for GMAT 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Dr. M. I. Rajpoot wants to buy an air-conditioner for his family. He went to a shop and selects an AC whose price is Rs. 12,700. The shopkeeper gave him two offers either you pay the full amount of Rs. 12,700 or pay only Rs. 4,000 and installment of Rs. 3000 per month for next 3 months just paying only Rs. 300 as interest. What is the rate of interest the shopkeeper charged Rajpoot? Why interest is not calculated at month level?.
Dr. M. I. Rajpoot wants to buy an air-conditioner for his family. He went to a shop and selects an AC whose price is Rs. 12,700. The shopkeeper gave him two offers either you pay the full amount of Rs. 12,700 or pay only Rs. 4,000 and installment of Rs. 3000 per month for next 3 months just paying only Rs. 300 as interest. What is the rate of interest the shopkeeper charged Rajpoot? Why interest is not calculated at month level? for GMAT 2025 is part of GMAT preparation. The Question and answers have been prepared according to the GMAT exam syllabus. Information about Dr. M. I. Rajpoot wants to buy an air-conditioner for his family. He went to a shop and selects an AC whose price is Rs. 12,700. The shopkeeper gave him two offers either you pay the full amount of Rs. 12,700 or pay only Rs. 4,000 and installment of Rs. 3000 per month for next 3 months just paying only Rs. 300 as interest. What is the rate of interest the shopkeeper charged Rajpoot? Why interest is not calculated at month level? covers all topics & solutions for GMAT 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Dr. M. I. Rajpoot wants to buy an air-conditioner for his family. He went to a shop and selects an AC whose price is Rs. 12,700. The shopkeeper gave him two offers either you pay the full amount of Rs. 12,700 or pay only Rs. 4,000 and installment of Rs. 3000 per month for next 3 months just paying only Rs. 300 as interest. What is the rate of interest the shopkeeper charged Rajpoot? Why interest is not calculated at month level?.
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