Question

30. You buy items costing $400 and finance the cost with a simple interest fixed installment

loan at 6% simple interest per year. The finance charge is $48.
a. How many years will you be paying?
b. What is your monthly payment?

Answer 1

A=P×(1+rt)

Where:

A = Total amount

P = principal amount = $400

r = interest rate = 6 % =6/100 = 0.06

t = time period = x

Finance charge = $48

we will first divide the interest rate by 12 to find the monthly interest rate.

`\begin{gathered} A=P+I \\ A=400+48 \\ A=448 \end{gathered}`

To find the number of years of paying

`\begin{gathered} I=P* rt \\ 48=400*0.06t \\ 48=400*0.06t \\ 48=24t \\ t=(48)/(24) \\ t=2 \\ t=2\text{years} \end{gathered}`

Time = 2 years

2 years = 2 x 12 = 24 month

(b) Now to find the monthly payment, we will simply divide the total amount payable by number of months.

Monthly payment

`\begin{gathered} A=P+I \\ A=400+48 \\ A=448 \end{gathered}`

Monthly payment =

`(448)/(2(12))=18.67`

Therefore the monthly payment = $19