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March 28, 2017

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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?

  • math - ,

    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
    http://en.wikipedia.org/wiki/Amortization_calculator

    It is
    A = P i /[1 - (1+i)^-n]

    In your case,

    A = 796*.0161667/[1 - 0.74929] = $51.32

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