Question:medium

A Ltd purchased a machine on Hire Purchase system from B Ltd on January 1, 2024, paying immediately ₹20,000 and agreeing to pay three instalments of ₹20,000 each on December 31 every year. 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:

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Logic Tip: In hire purchase, interest is charged on the outstanding balance, i.e. cash price less the down payment (₹74,500 - ₹20,000 = ₹54,500).

Updated On: Oct 3, 2026

₹3,725
₹4,000
₹2,725
₹1,861

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The Correct Option is C

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