Question

What is the installment scheme?
(A) A sum of money paid in small parts in a fixed period of time
(B) A sum of money not paid in equal parts in a fixed period of time
(C) Initial payment is paid at a period of time
(D) A single payment with a plan of loan

Answer 1

Hint: Use the meaning of installment scheme to check each of the options mentioned in the question. An installment scheme is a systematic process of making payments by dividing the large sum into smaller parts and paying it in a fixed period of time. Use this definition and eliminate the incorrect options from the given.

Complete step-by-step answer:
Here in this problem, we need to find which of the given options best describes the term ‘installment scheme’. We are given with four different options and only one of them is correct.
An installment plan is a way of buying goods gradually. We make regular payments to the seller until, after some time, we have paid the full price and the goods belong to you. In this way, we don’t have to give away a large sum of money in a single payment. This method helps when the buyer or investor cannot pay the sum at once but surely can pay the money in smaller parts. This method works in buying products that require large capital, any investment plans, or paying the loan money back in a systematic way.
In option (D), which is ‘a single payment with a plan of loan’, cannot be the correct answer because an installment scheme is not ‘a single payment’.
In option (C), which is ‘initial payment is paid at a period of time’ can also not be the correct answer because installments are not just ‘initial payments’.
In option (B), which is ‘a sum of money not paid in equal parts in a fixed period of time’, can also not be the correct answer because the installments scheme is the amount paid in small parts in a fixed period of time.
Therefore, the option (A), which is ‘a sum of money paid in small parts in a fixed period of time’, is the most appropriate as it suits the above description of installments.
Hence, the option (A) is the correct answer.

Note: Installments is defined as a sum of money due as one of several equal payments for something, spread over an agreed period of time. An alternate approach is to start with the given options and eliminate the options which do not have any relevant meaning to the term ‘installment scheme’.