Question

Heather wants to purchase an electric guitar. The price of the guitar with tax is $2,240. She can't afford to buy it right now, so she asks the store about an installment plan. The do have one and it requires a 20% down payment. The remainder, plus an additional finance charge, is paid back on a monthly basis for the next two years. The monthly payment is $88.75. What is the finance charge?

Answer 1

• Principal=2240$

Down payment

`\\ \sf\longmapsto 2240(0.20)`

`\\ \sf\longmapsto 448/$`

Pay amount:-

• 2240-448=$1792

• Monthly payment=$88.75

Total pay without finance charge

`\\ \sf\longmapsto 88.75(24)=\$2130`

Finance charge:-

`\\ \sf\longmapsto 2130-1792=338\$`

Answer 2

• $338

Explanation:

20% down payment:

• $2240*0.2 = $448

The loan amount:

• $2240 - $448 = $1792

Sum of monthly payments:

• 24*$88.75 = $2130

The finance charge is the difference in the loan amount and total monthly payments:

• $2130 - $1792 = $338