A scooter has two sale offers: ₹12,000 cash or ₹12,880 payable after 8 months. If money costs 18% per annum (simple interest), which offer is better?

Concept / Approach
Compare the present worth (PW) of the credit price to the cash price using simple interest. For amount A due after time t at annual rate r: PW = A / (1 + r × t) Here, t = 8/12 years and r = 18% p.a.

Step-by-step calculation
A = ₹12,880 r = 0.18,   t = 8/12 = 2/3 → r × t = 0.18 × (2/3) = 0.12 PW = 12,880 / (1 + 0.12) = 12,880 / 1.12 = ₹11,500

Decision
The credit option is worth ₹11,500 today, which is less than the ₹12,000 cash price. Therefore, taking cash ₹12,000 is financially better.

Common pitfalls

• Comparing future amounts directly to cash without discounting.
• Using 18% straight on 8 months (must scale by 8/12).
• Rounding 12,880/1.12 incorrectly (it is exactly 11,500).

Final Answer
Cash offer of ₹12,000 is better.