Question

. Earl purchased a living room set for $3,592 using a 12-month deferred payment plan. The interest rate after the introductory period is 21.80%. A down payment of $275 is required as well as a minimum monthly payment of $112. What is the balance after the introductory period if only the minimum payment is made until then?

Answer 1

Im a little confused a bit, but the total with the down payment + the 12 months of paying which is $112 a month im assuming with the 21.8%, i got $1,971.94 is what they pay, so would the answer be $1,620.06?

Answer 2

The required answer is $2839.25.

Explanation:

`112*12=1344` dollars

Plus down payment =
`1344+275=1619` dollars

Now, compound interest is found as:

`A=p(1+(r)/(n))^(nt)`

p = 3592

r = 21.80% or 0.2180

n = 12

t = 1

Substituting the values in formula:

`A=3592(1+(0.2180)/(12))^(12)`

=>
`A=3592(1.018167)^(12)`

A = $4458.25

So, Balance =
`4458.25-1619=2839.25` dollars

Therefore, the required answer is $2839.25.