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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]
Solution
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
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