Question

A used motorcycle can be purchased for $500 cash or on credit with a $200 down payment plus payments of $70 per month for 5 months. How much would be saved by paying cash?

a) $50
b) $100
c) $200
d) $350

Answer 1

Paying cash for the motorcycle costs $500, while the credit option amounts to a total of $550. Thus, paying in cash saves you $50. The correct answer is A.

Step-by-step explanation:

You asked how much would be saved by paying cash for a used motorcycle instead of using credit with a $200 down payment and $70 per month for 5 months. To answer this question, we need to calculate the total cost for both paying in cash and paying with credit, then compare the two.

The cash price is $500. If you pay with credit, you make a down payment of $200 and then pay $70 monthly for 5 months. The total paid with credit is the down payment plus the sum of the monthly payments: $200 + ($70 × 5 months) = $200 + $350 = $550.

Now, subtract the cash price from the total credit price to find the savings: $550 - $500 = $50.

Therefore, you would save $50 by paying cash.