Question

2. You buy a wedding gown for $2,999, plus sales tax of 7.5%. The retailer finances...

2.

You buy a wedding gown for $2,999, plus sales tax of 7.5%. The retailer finances the entire amount (including the sales tax) for 3 years and says you will be charged 12% interest. However, the retailer uses the add-on method. Calculate your monthly payment.

a.

$121.79
b.

$107.08
c.

$99.61
d.

$106.02
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Homework Answers

Answer #1

Cost of Gown = $2999

Sales Tax = 7.5% * $2999 = $224.93

Total Cost of Gown = $2999 + $224.93 = $3223.93

As per add on method of interest, total interest is calculated as simple interest on starting loan amount for the entire duration

i.e. interest using add on method = P * r * t (P is Principal, r is rate of interest & t is time)

Total interest using add on method = $3223.93 * 12% * 3 = $1160.61

Hence total amount of repayment = $3223.93 + $1160.61 = $4384.54

Monthly payment = $4384.54/(3*12) = $4384.54/36 = $121.79

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