Question

You purchase a couch for $509.84 plus 4% sales tax. The furniture store offers an installment loan that allows you to pay for the couch by making 12 equal monthly payments of $49.60. What is the cost of credit, in dollars, for this loan? Round your answer to the nearest cent.

Answer 1

The total cost of the couch including sales tax is:

$509.84 + 0.04($509.84) = $530.34

The total cost of the loan is:

12($49.60) = $595.20

So the cost of credit is:

$595.20 - $530.34 = $64.86

Rounded to the nearest cent, the cost of credit is $64.86.