Stereo Inc. sells a stereo system for $300 down and monthly payments of $80 for the next 3 years. If the interest rate is 4.25% per year, find:
a) The cost of the stereo.
Answer = $
b) The total amount of interest paid.
Answer = $
a. $80/month x 12mo/yr x 3yr = ?
? + 300 = total cost.
To find the cost of the stereo, we need to calculate the total amount paid over the next 3 years:
First, calculate the monthly payment for 3 years (36 months):
$80/month * 36 months = $2,880
Next, to find the cost of the stereo, we need to add the down payment to the total monthly payments:
$2,880 + $300 = $3,180
So, the cost of the stereo is $3,180.
To find the total amount of interest paid, we need to calculate the difference between the total amount paid and the cost of the stereo:
Total interest paid = Total amount paid - Cost of the stereo
Total interest paid = $3,180 - $3,000 (cost of the stereo without interest)
Total interest paid = $180
Therefore, the total amount of interest paid is $180.