a dvd player whose cash price is sh. 15000 is bought on hire purchase by paying a deposit of sh. 3000 and 12 monthly installments of sh. 1250 each. Calculate the rate of interest per annum
To calculate the rate of interest per annum, we need to find the total amount paid for the DVD player in installments and compare it to the cash price.
First, let's calculate the total amount paid in installments:
Monthly installment: sh. 1250
Number of installments: 12
Total amount paid in installments: 1250 x 12 = sh. 15,000
Next, let's calculate the amount remaining to be paid after the deposit:
Cash price: sh. 15,000
Deposit: sh. 3,000
Amount remaining to be paid: 15,000 - 3,000 = sh. 12,000
Now, we can calculate the interest paid on the remaining amount:
Interest paid: Total amount paid in installments - Amount remaining to be paid
Interest paid: 15,000 - 12,000 = sh. 3,000
To find the rate of interest per annum, we can use the following formula:
Rate of interest = (Interest paid / Amount remaining to be paid) x 100
Rate of interest = (3,000 / 12,000) x 100 = 0.25 x 100 = 25%
Therefore, the rate of interest per annum for this hire purchase transaction is 25%.