Solution for financial management assignment problem

There is no interest.

Balance price (10-2) = 8 lac, is paid as: 1 lac x 8 times, i.e. total instalment = total financed amount.

You didn’t mention the purchase price of the product now if you pay all the amount upfront. There's a concept in finance called EAI i.e. for Equated Annual Instalments, I’ll just give you an overview here and how you can apply whenever you want to calculate the Actual Interest rates whenever you acquire a product on instalments or whenever there is No interest EMI schemes in the market:

•  If you buy a product X for which if you buy today you’ll have to pay 800000 after getting a 200000 discount on list price, so your cash outflow shall be 800000 at t=0.
• Next in plan 2 you can also buy the product through financing options by paying upfront 200000 and paying rest in 8 instalments.
• Now to calculate interest prima facie you can see interest cost is 200000 but the interest shall be

                            8lakhs= 2lakhs+1lakh*PVAf(Interest rate,8years)

                                   6 =PVAf (r%,8 period

After looking into table you can find the actual interest rate applicable in your case.

Note: you can also add the processing fees on the RHS of the equation given above.