The cash prize of a television is shillings 25000. A customer paid deposits Shillings 3750. She repaid the amount owing in 24 equal monthly installments. If she was charged simple interest at the rate of 40% p.a, how much was each installment
To find out how much each installment was, we need to calculate the total amount owed, including the simple interest.
First, let's find out the amount owed after the deposit. The deposit made by the customer is Shillings 3750. So, the remaining amount to be paid is:
Amount owed = Cash prize - Deposit = Shillings 25000 - Shillings 3750 = Shillings 21250
Next, let's calculate the total interest charged over the repayment period. The interest rate is 40% per annum.
Simple interest = Principal * Rate * Time
Here, the principal is the amount owed, the rate is 40% (0.4 as a decimal), and the time is 24 months.
Total interest charged = Amount owed * Interest rate * Time
= Shillings 21250 * 0.4 * 2 years (24 months = 2 years)
= Shillings 8500
Now, let's find the total repayment amount, including interest:
Total repayment amount = Amount owed + Total interest charged
= Shillings 21250 + Shillings 8500
= Shillings 29750
To find out the amount of each monthly installment, we divide the total repayment amount by the number of months:
Installment amount = Total repayment amount / Number of months
= Shillings 29750 / 24
= Shillings 1239.58 (rounded to the nearest shilling)
Therefore, each monthly installment is approximately Shillings 1239.58.