Question

Jem bought a home computer for $1,299. He plans to pay $300 per month till the purchase is paid off. Assume there is a 1.5% interest charge on the unpaid balance and the U.S. Rule is used. What is the outstanding balance due at the end of the first month?

Answer 1

Explanation:

To calculate the outstanding balance due at the end of the first month, you can use the U.S. Rule for simple interest. The U.S. Rule calculates interest based on the unpaid balance at the end of each month. Here are the steps to find the outstanding balance:

1. Start with the initial balance, which is $1,299.

2. Calculate the interest charge for the first month. Since it's 1.5% interest per month, multiply the initial balance by 1.5% (or 0.015) to find the interest charge for the first month:

Interest = $1,299 * 0.015 = $19.485

3. Subtract the monthly payment from the initial balance to find the reduction in the balance:

Reduction = Monthly Payment = $300

4. Calculate the outstanding balance by subtracting the reduction from the initial balance and adding the interest charge:

Outstanding Balance = Initial Balance - Reduction + Interest

Outstanding Balance = $1,299 - $300 + $19.485

Now, calculate the outstanding balance:

Outstanding Balance = $1,299 - $300 + $19.485

Outstanding Balance = $999 + $19.485

Outstanding Balance = $1,018.49

So, the outstanding balance due at the end of the first month is $1,018.49.