BECKY KUBIAK WISHES TO PURCHASE NEW APPLICANCES FOR HER HOME. THE
TOTAL COST FOR THE APPLICANCES IS $2900. TO FINANCE THE PURCHASE, BECKY
MUST PAY 20% DOWN, WITH THE BALANCE BEING FINANCED WITH A 24-MONTH
INSTALLMENT LOAN WITH AN APR OF 8.5%. DETERMINE BECKY’S TOTAL FINANCE
CHARGE AND HER MONTHLY PAYMENT.?


Sagot :

Using the monthly payment formula, it is found that:

  • Her monthly payments are of $105.46.
  • The total finance charge is of $3,111.04.

What is the monthly payment formula?

It is given by:

[tex]A = P\frac{\frac{r}{12}\left(1 + \frac{r}{12}\right)^n}{\left(1 + \frac{r}{12}\right)^n - 1}[/tex]

In which:

  • P is the initial amount.
  • r is the interest rate.
  • n is the number of payments.

Considering that she must pay 20% down, the parameters are given by:

P = 0.8 x 2900 = 2320, r/12 = 0.085/12 = 0.007083, n = 24.

Hence the monthly payments are found as follows:

[tex]A = P\frac{\frac{r}{12}\left(1 + \frac{r}{12}\right)^n}{\left(1 + \frac{r}{12}\right)^n - 1}[/tex]

[tex]A = 2320\frac{0.007083(1.007083)^{24}}{(1.007083)^{24} - 1}[/tex]

A = $105.46.

The total finance charge is composed by the down payment plus the 24 monthly payments, hence:

F = 0.2 x 2900 + 24 x 105.46 = $3,111.04.

More can be learned about the monthly payment formula at https://brainly.com/question/26267630

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