Question

. A chest freezer can be purchased with cash for $2845 or on hire purchase for a deposit of 25% and 18 equal monthly instalments of $142.25. Calculate for the chest freezer:

(a) the hire purchase price.
(b) the interest charged.
(c) the percentage interest charged on the outstanding balance.​

Answer 1

(a) The hire purchase price can be calculated by adding the deposit to the total of the monthly instalments.

Deposit: 25% of $2845 = $711.25

Hire purchase price = Deposit + (Number of Instalments * Monthly Instalment)
Hire purchase price = $711.25 + (18 * $142.25)

(b) The interest charged can be calculated by subtracting the cash price from the hire purchase price.

Interest charged = Hire purchase price - Cash price

(c) The percentage interest charged on the outstanding balance can be calculated by dividing the interest charged by the outstanding balance and multiplying by 100.

Percentage interest charged on outstanding balance = (Interest charged / Outstanding balance) * 100

Let's calculate:

(a) The hire purchase price: $711.25 + (18 * $142.25) = $711.25 + $2560.50 = $3271.75

(b) The interest charged: $3271.75 - $2845 = $426.75

(c) The percentage interest charged on the outstanding balance: ($426.75 / $2845) * 100 ≈ 14.99%

Therefore:
(a) The hire purchase price is $3271.75.
(b) The interest charged is $426.75.
(c) The percentage interest charged on the outstanding balance is approximately 14.99%.