Question

A video camera is advertised at $1100. If bought on hire purchase, the terms are 25% deposit + 12 monthly repayments of $77.50. How much is saved by paying cash?

A. $550
B. $220
C. $165
D. $660

Answer 1

By paying cash, one would save $105 compared to buying the video camera on hire purchase. The Option C is the closest option.

The first deposit according to the agreement is computed as follows:

Deposit = 25% of $1100

= 0.25 * $1100

= $275

The total repayments over 12 months is:

= 12 * $77.50

= $930

So, the total cost on Hire Purchase is:

= Deposit + Total Repayments

= $275 + $930

= $1205

The amount saved by paying cash will then be:

= Cash Price - Total Cost on Hire Purchase

= $1100 - $1205

= -$105.