Question

Katie bought a piano for $4000. she made a down payment of $400. If she financed the balance at a simple interest rate of 8% with 24 equal payments, what are her installments?

Answer 1

Her installments are at a value of $162 each

Explanation:

First, we calculate the value of the balance

This is equal to the cost of the piano minus the cost of the down payment and that will be 4,000 - 400 = $3,600

Now this balance of $3,600 was financed at an interest rate of 8%

The interest here is thus 8/100 * 3,600 =$288

Thus the total amount she will be paying to cover the cost of the piano would be 3,600 + 288 = $3,888

It is this value she spread over 24 installments

The value of each installment is thus 3,888/24 = $162