Question

2. Imagine you work as a sales associate in the electronics section of a department

store and a customer has just walked in looking for a new television. After showing
him a few different models and some accessories, you give the customer the price
list below to review. You inform the customer that you offer an installment plan:
balances paid in full within three months are given a 5% discount and balances paid
after six months will accrue an interest of 3% each month from then on. Discount or
interest is applied before taxes. There is also a state sales tax of 6% applied to all

Answer 1

To calculate the amount of sales tax, multiply the item's price by the sales tax rate. The total interest on a loan can be calculated using the principal amount, the interest rate, and the time period. Discounts or interest due to payment plans are applied before sales tax.

Step-by-step explanation:

Calculating Sales Tax and Applying Discounts and Interest

Understanding how to calculate sales tax, discounts, and interest is key when you are dealing with financial transactions like purchasing a television on an installment plan. To calculate the amount of sales tax, you must multiply the price of the item by the rate of sales tax, as in:

Amount of sales tax = Price × Rate of sales taxFor an item with a price before tax of $150 and a 10% sales tax, the calculation would be:

$150.00 × 0.10 (converting 10% to a decimal) = $15.00

Add this $15.00 to the original amount to find the total cost, which in this case would be $165.00.
Moreover, in a scenario where you have a simple interest rate, such as on a loan or an installment plan, the total interest can be calculated by multiplying the principal amount by the rate and the time of the loan. For instance:

Interest from a $5,000 loan after three years with a simple interest rate of 6% would be calculated as:$5,000 × 0.06 (6% rate as a decimal) × 3 years = $900 total interest.

If you received $500 in simple interest on a loan of $10,000 for five years, the annual interest rate you charged can be found by rearranging the simple interest formula:

$500 = $10,000 × Rate × 5 years

Solving for the Rate gives us:

Rate = $500 / ($10,000 × 5)

Rate = 0.01 or 1%

Remember that when a balance is paid in full within three months, a 5% discount is offered, but if a payment is made after six months, an interest of 3% per month from then on will be applied. Always apply these discounts or interests before adding sales tax.