Question

The Giordanos buy $7300 worth of furniture for their new home. They pay $1000 down. The store charged 10% add-on interest. The Giordanos will pay off the furniture in 18 monthly payments(1 1/2 years). Find the monthly payment.

Answer 1

Answer: the monthly payment is $379.1

Explanation:

The balance to be paid would be

7300 - 1000 = $6300

We would apply the periodic interest rate formula which is expressed as

P = a/[{(1+r)^n]-1}/{r(1+r)^n}]

Where

P represents the monthly payments.

a represents the amount to be paid

r represents the annual rate.

n represents number of monthly payments. Therefore

a = $6300

r = 0.1/12 = 0.0083

n = 12 × 1.5 = 18

Therefore,

P = 6300/[{(1+0.0083)^18]-1}/{0.0083(1+0.0083)^18}]

6300/[{(1.0083)^18]-1}/{0.0083(1.0083)^36}]

P = 6300/{1.16 -1}/[0.0083(1.16)]

P = 6300/(0.16/0.009628)

P = 6300/16.618

P = $379.1