Casil terest Price @ 5% p.a. (given) Paid (Inst-Int) Total cash price (-)Down payment 8,000 8,000 29,800.00 8,000.00 21,800.00 6,910.00 14,890.00 7,255.50 7,634.50 8,000 6,910.00 (-) I Instalment 1090.00 (21800x5%) 744.50 (14890x5%) 8,000 7,255.50 (-) II Instalment 7,634.50 8,000 7,634.50 365.50 (8000-7634.50) (-) III Instalment Nill 2,200.00 32,000 29,800.00 This method can be identified with the help of the following calculation. u3 Total amount payable Rs. Down payment 8,000 Instalmant amount (8000 x 3) 24,000 32,000 (-) Total cash price 29,800 Total Interest 2.200 The total payable amount is more than the total cash price payable, so the difference is the total amount of interest. Therefore Rs. 8000 payable for 3 years is Instalment amount. Cash price paid has to be found out i.e. (Instalment amount - Interest). 2. When the rate of interest and total cash price are given and Instalment amount is not given: As in the first situation of calculating interest here also interest is calculated on the outstanding balance of total cash price. In the previous method, Instalment was given and cash rice paid of each Instalment was calculated. But here cash price paid is given and Instalment amount for each period has to be calculated. In this situation, Interest is calculated with a certain percentage till the last Instalment. Sharma purchased a machine on hire purchase system on 1.4.2008. The cash price of the machine was Rs.2.10,000. According to the agreement, Rs.60,000 to be paid on delivery. The balance to be paid in four Instalments of Rs. 37,500 each annually plus Interest. Interest is charged @ 20%p.a. Calculate the Interest