Question

Michael, a farmer, wants to buy a new tractor. The price of the tractor is R160 000, VAT

excluded. He can afford a deposit of R20 000. He decides to buy the tractor on hire

purchase over a period of 60 months and simple interest of 10%. What would he pay in

total after 60 months?

Answer 1

R 230000

Explanation:

After depositing R 20000, the remaining amount to payback will be R (160000 - 20000) = R 140000

Now, this amount is paid back in 60 months i.e. 5 years at a simple interest of 10% per year.

So, Michael has to pay
`140000(1 + (10 * 5)/(100)) = 210000` R.

Therefore, he would pay in total after 60 months will be R (210000 + 20000) = R 230000. (Answer)