Posted by sabina on .
Jean purchased a $995 stereo system on the installment plan. She paid
20% down. The finance charge on the remainder was 19.4%. She was
given 18 months to pay off the balance. What was her monthly payment?
The original unpaid balance was
P = 0.8 x 995 = $796.00
A finance charge of 19.4% is 19.4%/12 = i = 1.61667% per month. The number of payments is n = 18
The formula you need to use can be found at
A = P i /[1 - (1+i)^-n]
In your case,
A = 796*.0161667/[1 - 0.74929] = $51.32