Question

20. Sarah bought a lawnmower for $320. She signed up for the buy now pay later plan at the store with the following conditions: $100 down and payments of $25 for the next 12 months. The extra cost paid by taking this plan is equivalent to what actual yearly rate of interest?

A. 85%
B. 25%
C. 67%
D. 65%
You answered : B
Correct Answer : C

Answer 1

The correct answer is "C".

If Sarah has decided to make an initial payment of $ 100, this will leave a pending payment of $ 220 (the principal). If Sarah has agreed to pay the remaining amount in monthly installments of $ 25 for the next 12 months. This means she will end up paying $ 300.

The interest paid for this product is $ 80, representing an annual rate of 67%.