Question

Stereo Inc. sells a stereo system for $200 down and monthly payments of $60 for the next 2 years. If the interest rate is 2.75% per month, find: a) The cost of the stereo. Answer = $ b) The total amount of interest paid. Answer = $

Answer 1

We have formula to find loan balance

L=

We need loan balance to become zero

Let original price be x dollars

Original-amount-owned=(price-200)$ =(x-200)$

I =0.0275

P=60$

n=2yrs = 24 months

Substituting above values in the equation of L and equating L=0

We get

X=1244.047802$

If we want, we can round this to 1244$

b)

Amount customer need to pay = 200+24*60 =1640

Total interest need to pay=1640-1244 = 396

Ans : 396$