A dealer marks the price of a computer at UGX4,800,000. If he charges 15% higher under the hire purchase scheme with a deposit of UGX 1,200,000 and six equal monthly installments, calculate the amount of money to be paid in each monthly installment.
Answer (1)
Calculate the hire purchase price by adding 15% of the marked price to the marked price: H = 4800000 + 0.15 × 4800000 = 5520000
Subtract the down payment from the hire purchase price to find the remaining balance: R = 5520000 − 1200000 = 4320000
Divide the remaining balance by the number of monthly installments to find the amount of each installment: I = 6 4320000 = 720000
The amount to be paid in each monthly installment is UGX 720,000: 720000
Explanation
Calculate the Hire Purchase Price First, we need to determine the hire purchase price of the computer. The dealer charges 15% higher than the marked price of UGX4,800,000. To calculate this, we multiply the marked price by 15% and add it to the original price.
Calculating the Hire Purchase Price The hire purchase price ( H ) is calculated as follows: H = M + 0.15 × M
where M is the marked price (UGX4,800,000). H = 4800000 + 0.15 × 4800000
H = 4800000 + 720000
H = 5520000 So, the hire purchase price is UGX5,520,000.
Subtract the Down Payment Next, we need to subtract the down payment from the hire purchase price to find the remaining balance. The down payment is UGX1,200,000.
Calculating the Remaining Balance The remaining balance ( R ) is calculated as: R = H − D where H is the hire purchase price (UGX5,520,000) and D is the down payment (UGX1,200,000). R = 5520000 − 1200000
R = 4320000 So, the remaining balance is UGX4,320,000.
Divide by the Number of Installments Now, we need to divide the remaining balance by the number of monthly installments to find the amount of each installment. There are 6 equal monthly installments.
Calculating the Installment Amount The amount of each installment ( I ) is calculated as: I = n R where R is the remaining balance (UGX4,320,000) and n is the number of installments (6). I = 6 4320000 I = 720000 Therefore, the amount to be paid in each monthly installment is UGX720,000.
Final Answer Therefore, the amount of money to be paid in each monthly installment is UGX 720,000.
Examples
Understanding hire purchase schemes is crucial in everyday financial planning. For instance, when buying a car or electronic appliance, the dealer often offers a hire purchase option. By calculating the total cost, including interest and installments, you can compare it with other financing options or outright purchase. This helps you make an informed decision based on your budget and financial goals, ensuring you don't overpay in the long run. For example, if you are considering buying a refrigerator for UGX 2,000,000 with a 10% higher hire purchase price, a down payment of UGX 500,000, and 12 monthly installments, you can calculate the monthly payment to see if it fits your budget.
