Discussion
A man wants to sell his scooter .There are two offers one at Rs12000 cash and other at a credit of Rs12880 to be paid after 8 months ,money being at 18% per annum which is better offer?
Answer: B
\[ \text{Amount} = \text{PW}\left(1 + \frac{RT}{100}\right), \qquad \text{TD} = \text{Amount} - \text{PW} \]
Convert the credit offer to today's money before comparing.
\[ T = \frac{8}{12} = \frac{2}{3} \text{ year}, \qquad \frac{RT}{100} = \frac{18 \times 2/3}{100} = 0.12 \]
\[ \text{PW of credit offer} = \frac{12880}{1.12} = \text{Rs. } 11500 \]
\[ 12000 > 11500 \]
The cash offer is worth Rs. 500 more today, so Rs. 12,000 cash wins. The Rs. 880 premium fails to cover eight months of interest at 18%.
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