Question

Jon and Erin are purchasing a new TV and stereo surround system for their living room. The cost of both items is $1675.00. They are purchasing them with an installment loan that has an APR of 12%. The store financing requires a 10% down payment, and 12 monthly payments. A. Find the amount of the down payment. B. How much will they finance? C. Write an equation for the monthly payment. Use the chart below.

Answer 1

$167.50

$1507.50

$134

Explanation:

Given that:

Cost of sound system = 1675

APR, = 12%

Down payment = 10%

Number of monthly payments = 12

r = 0.12 / 12 = 0.01

Amount of down-payment :

10% * cost of sound system

0.1 * 1675 = $167.50

Amount to be financed :

$1675 - $167.50

= $1507.50

Monthly repayment :

Using the relation :

A / {[(1+r)^n]-1}/[r(1+r)^n]

1507.5 / (1+0.01)^12-1)/(0.01(1+0.01)^12)

1507.50 / 0.1268/(0.01 * 1.1268)

1507.50 ÷ (0.1268/0.01126)

1507.50 ÷ 11.25

= $134