Question

Stereo Inc. sells a stereo system for $200200 down and monthly payments of $9090 for the next 2 years. If the interest rate is 55% per year compounded monthly, find:
a) The cost of the stereo.

Answer = $

b) The total amount of interest paid.

Answer = $

Answer 1

Down Payment = 200

Monthly payment = 90

Interest rate = 5%

EMI =

r is the rate of interest for a compounding period i.e. 0.05 / 12 = 0.00416666666

n is the no of compoundind period i.e. 2 years * 12 = 24 months

90 =

90 = Prinicpal * 0.0438713897

Prinicpal = 90 / 0.0438713897

Prinicpal = 2051.45

Cost = Principal + Down Payment

=  2051.45 + 200

= 2251.45

Total Interest Paid = (Monthly payment * no of months + Down payment) - Cost

=(90 * 24 + 200) - 2251.45

= 2360 - 2251.45

= 108.55