A car is purchased on hire-purchase. The cash price is $21,000. Terms: a deposit of 10% of the cash price, and the remaining balance is paid over 60 equal monthly instalments. If interest is charged at 12% per annum simple interest on the outstanding balance for the full 60 months, what is the total cost of the car (in $)?

Introduction / Context:
This hire-purchase question is modeled as a flat (simple) interest charge on the financed balance over the entire period, then added back to principal along with the deposit. The steps are: compute deposit, compute financed balance, compute simple interest on that balance for the term (60 months = 5 years), then add deposit + balance + interest to get the total cost paid by the buyer. Because the question explicitly says simple interest for the full term, we do not use reducing-balance EMI logic here.

Given Data / Assumptions:

• Cash price = $21,000
• Deposit = 10% of cash price
• Financed balance = cash price - deposit
• Time = 60 months = 5 years
• Simple interest rate = 12% per annum on financed balance

Concept / Approach:
Deposit = 0.10 * 21000 Balance = 21000 - Deposit Interest = Balance * 0.12 * 5 Total cost = Deposit + Balance + Interest

Step-by-Step Solution:
Deposit = 10% of 21000 = 2100 Balance financed = 21000 - 2100 = 18900 Time = 60 months = 60/12 = 5 years Simple interest on balance = 18900 * 0.12 * 5 = 18900 * 0.60 = 11340 Total cost = 2100 + 18900 + 11340 = 32340 Total cost = $32,340

Verification / Alternative check:
The interest amount (60% of the financed balance) is reasonable for 12% over 5 years under a flat/simple model. Adding back principal and deposit yields the full paid cost, which should exceed $21,000 as expected.

Why Other Options Are Wrong:
$31,240 and $30,240 imply less interest than 12% for 5 years. $33,600 corresponds to charging interest on the full cash price for 5 years (21000*0.12*5 = 12600) which does not match “on the balance”. $29,240 is far too low.

Common Pitfalls:
Calculating interest on the full $21,000 instead of the financed balance, converting 60 months incorrectly, or applying reducing-balance EMI methods even though the question specifies simple interest on the balance.

Final Answer:
The total cost of the car is $32,340.