Question

Makaela is planning to purchase an iPhone that costs $1,500. The installment plan offered at the store is a 20% down payment and 18 monthly payments of $75 each. What will be the finance charge for the installment plan?

Answer 1

The finance charge for the installment plan is $-150 if only the monthly payments are considered. If the full cost of the iPhone plus the monthly payments are considered, the finance charge is $2,850.

Step-by-step explanation:

To calculate the finance charge for the installment plan, we need to determine the total amount paid over the course of the 18 monthly payments. The down payment is 20% of $1,500, which is $300. Each monthly payment is $75, so the total amount paid over 18 months is $75 * 18 = $1,350. The finance charge is the difference between the total amount paid and the cost of the iPhone, which is $1,350 - $1,500 = $-150.

If you are paying the full cost of the iPhone plus the monthly payments, then the finance charge would be the total amount paid minus the cost of the iPhone, which is $1,350 + $1,500 = $2,850.