Time Value of Money

Concept:The unpaid amount is paid in equal annual installments, which are found using the present value of an annuity formula.Explanation:Cost of bike = Rs. 80,000Down payment = Rs. 30,000Unpaid amount = $80,000 - 30,000 = 50,000$ Rs.This unpaid amount is the present value of 4 equal annual payments at $14\%$ interest.Present value factor for 4 years at $14\%$ is $P(4,0.14) = 2.91371$.So, $50,000 = \text{PMT} \times 2.91371$Thus, $\text{PMT} = \frac{50,000}{2.91371} = 17160.25$ Rs.Answer:Rs. 17160.25