Question

Your original purchase price was $950.00 plus 5% sales tax. You enter into an agreement where the interest (12.5% APR) is waived for the first 12 months provided you make the required monthly payments; otherwise the interest is accrued from the date of purchase. You missed the first payment due date. The late fee is $35.00. How much is the interest?

$10.39
$9.90
$124.69
$118.75

Answer 1

interest is $10.39

Step-by-step explanation:

Give data:

Purchase price is $950.00

sales tax= 5%

APR = 12%

Late fee is $35

Purchase price after sales tax will be
`950 + 0.05* 950 = $ 997.50`

Monthly rate will be
`(12.5)/((12)/(100)) = 0.010417`

Interest on purchase price
`= 997.50 * .010417 = $10.39`

hence interest is $10.39

Answer 2

Given:
Purchase Price: 950
Sales tax: 5% of 950 = 47.50
Total amount applied for credit: 950 + 47.50 = 997.50
APR = 12.5%
Monthly interest rate: 12.5% / 12 = 1.0417%

Interest = 997.50 x 1.0417% = 10.3910 or 10.39

*I assumed that the sales tax paid was included in the credit card payment. Thus, interest for said tax was also computed. The late fee charged was not part of my computation because it is not a part of the original amount.