Question

A company bought a motor valued at ₱25,000 on an easy instalment plan, as follows: 20% cash
on delivery of the motor and the balance to be paid in 24 monthly instalments with 12%
nominal interest on the unpaid balance.
(a) How much would the company pay each month?
(b) If instead of the terms above, the company decided to start a sinking fund to enable it to
purchase the same motor after 2 years on cash basis, at the same value less 10% discount
for cash purchase, how much would the monthly deposit in the fund be, if the money will
earn interest at 6%? Assume that payment in the sinking fund is done in the beginning of
each month.

Answer 1

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