Final answer:
The extra cost of buying a refrigerator on hire purchase as a percentage of the cash price is calculated by subtracting the cash price from the total hire purchase price and dividing it by the cash price, then multiplying by 100%. In this case, the extra cost percentage is 62.5%.
Step-by-step explanation:
The student has asked us to calculate the additional cost of buying a refrigerator on hire purchase compared to its cash price and express this additional cost as a percentage of the cash price. With a deposit of $500 and monthly payments of $250, we can determine the total amount paid for the refrigerator on hire purchase.
First, let's calculate the total paid on-hire purchase:
- Deposit: $500
- Total monthly payments: $250 x number of months
- The total hire purchase cost (deposit + monthly payments) must equal $6500.
To find the number of months, we subtract the deposit from the hire purchase price and divide by the monthly payment: ($6500 - $500) / $250 = 24 months. So, the total paid is $500 (deposit) + ($250 x 24) = $6500.
Now, let's calculate the extra cost of buying on hire purchase:
- Extra cost = Total hire purchase price - Cash price
- Extra cost = $6500 - $4000 = $2500
To express this extra cost as a percentage of the cash price, we use the following formula:
Extra cost percentage = (Extra cost / Cash price) x 100%
Extra cost percentage = ($2500 / $4000) x 100% = 62.5%
Therefore, the extra cost of buying the refrigerator on hire purchase is 62.5% of the cash price.