Question

A Ltd purchased a machine on Hire Purchase system from B Ltd. The cash price of the machine is ₹74,500 and Hire Vendor charges interest at 5% p.a. The amount of interest payable by A Ltd to B Ltd on December 31, 2024 is:

• A. ₹3,725
• B. ₹4,000
• C. ₹2,725
• D. ₹1,861

Hint:

Logic Tip: In Hire Purchase questions, interest is generally calculated on outstanding cash price using simple interest formula.

Answer 1

The Correct Option is A

Step 1:
Given:
• Cash Price of Machine $= ₹74,500$
• Rate of Interest $= 5%$ p.a.

Step 2:
Interest under Hire Purchase system is calculated as: \[ \text{Interest}=\frac{P \times R \times T}{100} \] where:
• $P = 74,500$
• $R = 5%$
• $T = 1$ year

Step 3:
\[ \text{Interest}=\frac{74,500 \times 5 \times 1}{100} \] \[ = ₹3,725 \]

Step 4:
Therefore, the amount of interest payable is: \[ \boxed{₹3,725} \] Hence, the correct answer is: \[ \boxed{\text{(1) ₹3,725}} \]