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Mary bought a computer on hire purchase. If the cash price on the computer was $3 million and 25% was down payment if bought on hire purchase. If the balance was paid in 12 monthly installment at 12% interest per annum.

Find the percentage increase or decrease if computer was bought on cash price.

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There is a possible ambiguity here. There are different types of interest rates and you haven't told us which. When you say 12% per annum, have you learned that will translate to 1% per month (i.e., just divide by 12)? This first type would be called a nominal interest rate. Or, have you needed to do a calculation like $1.12^{1/12}-1$ to get the interest rate? This calculation is necessary if 12% is an effective annual interest rate. –  Graphth Sep 23 '12 at 12:07

1 Answer 1

If purchased on hire price : Then,
The cash price= 3 million dollar
Down payment: 0.75 million dollar
The interest calculated = (2.25*12/100) = $0.6075 million
So, percentage decrease if computer was bought on cash price = (0.6075*100)/3 = 20.25%

Thanks

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