   Chapter 13.II, Problem 10RE ### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447

#### Solutions

Chapter
Section ### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
ISBN: 9781305585447
Textbook Problem

# Calculate the amount financed, the finance charge, and the monthly payments. For the following add-on interest loans.Purchase(Cash) Down Amount Add-on Number of Finance MonthlyPrice Payment Financed Interest Payments Charge Payment$4,000 15% _______ 11 1 2 % 30 _______ _______ To determine To calculate: The amount financed, the finance charge and the monthly payment for the installment where purchase price is$4,000, down payment is 15, add-on interest is 11.5% and number of payments is 30.

Explanation

Given Information:

The amount of purchase price is $4,000, down payment is 15, add-on interest is 11.5% and number of payments are 30. Formula used: Follow the steps to compute the regular monthly payment of an installment loan using add-on interest. Step 1: The amount financed is computed by complement method as the percentage financed is 100% minus the down payment percent. Amount financed=Purchase price(100%Down payment percent) Step 2: Finance charge is computed by multiplying principle with rate and time with the amount financed as the principal. I=P×R×T Where, I is the finance charge, P is the amount financed, R is the rate of interest and T is the time. Step 3: The total amount of installments payment is computed by adding amount financed and finance charge. Total amount of installment payments=Amount financed+Finance charge Step 4: The regular monthly payments is computed by dividing the total number of payments by total number of months of the loan. Regular monthly payments=Total number of installment paymentsNumber of months of the loan Calculation: Consider that purchase price is$4,000, down payment is 15%, add-on interest is 11.5% and number of payments is 30.

Compute amount financed by substituting purchase price equals to $4,000 and down payment equals to 15%, Amount financed=Purchase price(100%Down payment percent)=$4,000(100%15%)=$4,000×85%=$3,400

Hence, amount financed is \$3,400

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