Mathematics of FinanceMCQMTP Nov 21Question 1331 of 512
All Questions

Arun purchased a vacuum cleaner by giving $1700$ as cash down payment, which will be followed by five EMIs of $480$ each. The vacuum cleaner can also be bought by paying $3900$ cash. What is the approx. rate of interest p.a. (at simple interest) under this instalment plan?

Select Your Answer (Keyboard: A, B, C, D)
For any discrepancies in this question, email contact@cadada.in

Correct Answer

✅ Option c — $22\%$

All Options:

  • A$18\%$
  • B$19\%$
  • C$22\%$
  • D$20\%$

Detailed Solution & Explanation

**Derivation of Approximate Simple Interest Rate under Instalment Plan** Given: - Cash Price = Rs. 3,900\displaystyle Rs. \displaystyle \text{Rs. }3,900 - Down Payment = Rs. 1,700\displaystyle Rs. \displaystyle \text{Rs. }1,700 - Principal borrowed (P\displaystyle P) = $3900 - 1700 = Rs. \displaystyle \text{Rs. }2,200$ - Five monthly instalments of Rs. 480\displaystyle Rs. \displaystyle \text{Rs. }480 each - Total amount paid via EMIs = 5×480=Rs. 2,400\displaystyle 5 ×\displaystyle \times 480 = Rs. \displaystyle \text{Rs. }2,400 - Total Simple Interest paid (SI\displaystyle SI) = $2400 - 2200 = Rs. \displaystyle \text{Rs. }200$ - Total period (T\displaystyle T) = 5\displaystyle 5 months = 512\displaystyle 512\displaystyle \frac{5}{12} year **Step 1: Apply the standard simple interest formula as a textbook approximation** Using SI=P×R×T100\displaystyle SI = P×R×T100\displaystyle \frac{P \times R \times T}{100}: 200=2200×R×512100200 = 2200×R×512100\displaystyle \frac{2200 \times R \times \frac{5}{12}}{100} 200=22×R×512200 = 22 ×\displaystyle \times R ×\displaystyle \times 512\displaystyle \frac{5}{12} 200=R×11012200 = R ×\displaystyle \times 11012\displaystyle \frac{110}{12} R=2400110=21.82%≈22% per annumR = 2400110=21\displaystyle \frac{2400}{110} = 21.82\% ≈\displaystyle \approx 22\%  per annum\displaystyle \text{ per annum} Hence, **Option C** is the correct answer.

About This Chapter: Mathematics of Finance

Paper

Paper 3: Quantitative Aptitude

Weightage

12-16 Marks

Key Topics

Simple & Compound Interest, Annuity, Perpetuity

The most important mathematical chapter in the entire syllabus. It covers Simple Interest (SI), Compound Interest (CI), Nominal vs Effective rates, Present and Future Value, Annuities (Ordinary and Due), Sinking Funds, and Perpetuities. The concepts learned here are applied heavily in CA Intermediate and Final.

View Official ICAI Syllabus

Exam Strategy Tip

Guaranteed 12-16 marks. Master your calculator! Learn the 'GT' and compound interest M+/M- tricks to solve annuity questions in 10 seconds without writing long formulas.

Related Comparison Tables

More Questions from Mathematics of Finance

Ready to Master Mathematics of Finance?

Practice all 512 questions with instant feedback, earn XP, track your streaks, and ace your CA Foundation exam.

Start Practicing — It's Free