Question

Aston buys a $9,200 motorcycle on a deferred payment plan. There is no down payment and no interest for 24 months. Jerry must make a minimum payment of $75 a month for the first 23 months. To avoid a retroactive rate of 21%, he must pay the balance in full at the end of 24 months. If he pays $75 each month, how much should he pay the last month to avoid the interest charges?

Answer 1

If Aston pays $75 each month for 23 months, the total amount he would have paid after 23 months, is:

`75*23=1725`

Since the cost of the motorcycle is $9200, substract $1725 from $9200 to find the amount that is to be paid to cover the balance in full:

`9200-1725=7475`

Since $7475 are yet to be paid, Aston must pay that amount the last month if he wants to avoid interest charges.

Therefore, the answer is:

Aston should pay $7475 the last month.