Question

Q: I want to build a house, and a contractor was agreed upon on the amount of 55 million and 7% of reserves for a period of 6 months. The contractor asked for a third advance after two months. How much is the third advance?

I want the answer yet. 15 minutes

Answer 1

Cost of the contract less reserves = 51,150,000. (Reserves are created to meet the contingent liability.If everything goes fine the reserves are released at the end of the agreed period).

Hence curently if we assume that the contract term is for 6 months and the advance payment is to be made every month, in which case there will be 6 advances of 8,525,000 each which will be due every month.

Since the contractor has asked for third advance after two months, the amount to be paid is 8,525,000*2 = 17,050,000.

In another scenario, if we assume that during the period of six months the total number of installment to be paid as advance are 3 in such case also the third advance due will be 17,050,000.