Question

Business that offers repayment plan for purchases are required by law to disclose the interest rate but that doesn’t mean they go out of their way to let you know what it is you have to read all the paperwork find the interest rate for the following purchaseTo finance a new laptop Emily is offered a five year payment plan with low monthly payments of $31 and50 Cent the cost of the laptop is $884.43 including tax round to the decimal place if necessary

Answer 1

The number of years for the repayment is

`t=5years`

The amount to be repaid back monthly is

`\text{ \$31.50}`

The cost of the laptop given is

`\text{ P=\$884.43}`

Step 1:

Calculate the total amount of money to be repaid after 5 years

`\begin{gathered} Amount\text{ repayable=monthly payments}* number\text{ of years}*12 \\ Amount\text{ repayable=31.50}*5*12 \\ Amount\text{ repayable=1890} \end{gathered}`

Step 2:

Calculate the interest on the laptop

`\begin{gathered} interest=Amount\text{ repayable-cost of the laptop} \\ interest=1890-884.43 \\ interest=1005.57 \end{gathered}`

Step 3:

To calculate the interest rate, we will use the formula below

`\begin{gathered} I=(PRT)/(100) \\ (100I)/(PT)=(PRT)/(PT) \\ R=(100I)/(PT) \\ T=5,P=884.43,I=1005.57 \end{gathered}`

By substituting the values, we will have

`\begin{gathered} R=(100I)/(PT) \\ R=(100*1005.57)/(884.43*5) \\ R=(100557)/(4422.15) \\ R=22.7\% \end{gathered}`

Hence,

The interest rate will be

`\Rightarrow22.7\%`