Farouk bought an electric appliance through an instalment plan which he paid RM200 down payment. He had to make 12 monthly payments of RM120 each month to settle the unpaid balance. If the dealer charged him an interest of 5% per annum on the original balance, find the cash price of the item.

Farouk bought an electric appliance through an instalment plan which he paid RM200 down payment. He had to make 12 monthly payments of RM120 each month to settle the unpaid balance. If the dealer charged him an interest of 5% per annum on the original balance, find the cash price of the item.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 19P

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Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

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