Question

A down payment of $5000. and fourteen (14) monthly installments of $1650. each should be paid to purchase a television under hire purchase which can be bought at an outright purchase of $26,000. Therefore the rate of interest per annum is:

O 0.71%
O 0.86%
O 7.14%
O 8.57%
O None of the above​

Answer 1

The rate of interest per annum for the hire purchase of a television is 25.24%.

Step-by-step explanation:

To determine the rate of interest per annum for the hire purchase of a television, we can use the formula:

Interest = Total amount paid - Principal loan amount

First, let's calculate the total amount paid:

• 
  
• Down payment: $5000
• 
  
• Total monthly installments: 14
• 
  
• Monthly installment amount: $1650

Total amount paid = Down payment + (Number of installments * Monthly installment amount)

Total amount paid = $5000 + (14 * $1650) = $26,300

Now, let's calculate the interest:

Interest = Total amount paid - Principal loan amount

Principal loan amount = Outright purchase price - Down payment

Principal loan amount = $26,000 - $5000 = $21,000

Interest = $26,300 - $21,000 = $5,300

To calculate the rate of interest per annum, we need to divide the interest by the principal loan amount and then multiply by 100:

Rate of interest per annum = (Interest / Principal loan amount) * 100

Rate of interest per annum = ($5,300 / $21,000) * 100

Rate of interest per annum = 25.24%

Therefore, none of the provided options (0.71%, 0.86%, 7.14%, 8.57%) match the actual rate of interest per annum, which is 25.24%.