The cash price is K4200, the initial deposit is K700, and the interest is 10% in a hire purchase. Calculate the following:

(a) balance outstanding = Cash price - Initial price
(b) interest charged. Interest = Balance outstanding × interest
(c) total loan

Calculate the balance outstanding: Subtract the initial deposit from the cash price: B a l an ce = K 4200 − K 700 = K 3500 .
Calculate the interest charged: Multiply the balance outstanding by the interest rate: I n t eres t = K 3500 × 0.10 = K 350 .
Calculate the total loan: Add the balance outstanding and the interest charged: T o t a l L o an = K 3500 + K 350 = K 3850 .
The balance outstanding is K 3500 ​ , the interest charged is K 350 ​ , and the total loan is K 3850 ​ .

Explanation

Understanding the Problem We are given the cash price of an item, the initial deposit paid, and the interest rate for a hire purchase agreement. We need to calculate the balance outstanding, the interest charged, and the total loan amount.

Calculating Balance Outstanding (a) To find the balance outstanding, we subtract the initial deposit from the cash price: B a l an ce O u t s t an d in g = C a s h P r i ce − I ni t ia l De p os i t B a l an ce O u t s t an d in g = K 4200 − K 700 B a l an ce O u t s t an d in g = K 3500

Calculating Interest Charged (b) To find the interest charged, we multiply the balance outstanding by the interest rate: I n t eres tC ha r g e d = B a l an ce O u t s t an d in g × I n t eres tR a t e I n t eres tC ha r g e d = K 3500 × 0.10 I n t eres tC ha r g e d = K 350

Calculating Total Loan (c) To find the total loan, we add the balance outstanding and the interest charged: T o t a l L o an = B a l an ce O u t s t an d in g + I n t eres tC ha r g e d T o t a l L o an = K 3500 + K 350 T o t a l L o an = K 3850

Final Answer Therefore, the balance outstanding is K3500, the interest charged is K350, and the total loan is K3850.


Examples
Hire purchase agreements are commonly used when purchasing expensive items like cars or furniture. Understanding how to calculate the balance outstanding, interest charged, and total loan amount helps consumers make informed decisions about their purchases and manage their finances effectively. For example, if you want to buy a refrigerator costing K4200 and you pay an initial deposit of K700 with a 10% interest rate, you can calculate that your total repayment will be K3850.

Answered by GinnyAnswer | 2025-07-07

The balance outstanding is K3500, the interest charged is K350, and the total loan is K3850.
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Answered by Anonymous | 2025-07-09