Question

A man purchased a car selling for RM12,750 by making instalment payments. If he was charged 4% based on the reducing balance and the total interest paid was RM1,041.25, calculate the number of monthly payments he had made using the Constant Ratio formula.

Answer 1

48 months

Explanation:

Cost of car = RM12,750

interest charged = 4% = 0.04

total interest paid = RM1,041.25

Now,

Using the Constant Ratio formula

r =
`\frac{24*\textup{i}}{\textup{P(n+1)}}`

here,

i is the interest paid

P is the principle

n is the number of monthly installments

r is the interest rate

on substituting the respective values, we get

0.04 =
`\frac{24*\textup{1041.25}}{\textup{12,750(n+1)}}`

or

n + 1 = 49

or

n = 48 months