You purchase a computer for $875.00 plus 5% sales tax. You decide to finance it through the store's 0% program for 12 months. The terms state that you must pay $100.00/month and that if you miss a payment, you will be assessed a late fee of $39.00 plus the interest accrued to that point at a 14.25% APR. If you miss a payment in the eighth month, how much interest will you be charged?

Question

You purchase a computer for $875.00 plus 5% sales tax. You decide to finance it through the store's 0% program for 12 months. The terms state that you must pay $100.00/month and that if you miss a payment, you will be assessed a late fee of $39.00 plus the interest accrued to that point at a 14.25% APR. If you miss a payment in the eighth month, how much interest will you be charged?

(Please explain how you got the answer)
$83.13
$16.63
$87.28
$20.78

Answer 1

See previous post: Sun, 4-19-15, 7:26 PM.

Answer 2

To calculate the interest charged, we need to determine the interest accrued on the financed amount of $875.00 for the first 7 months, as well as the interest accrued from the beginning of the 8th month until the missed payment is made.

First, let's calculate the interest accrued for the first 7 months. The 0% program means that there is no interest charged during these months. Therefore, the interest accrued for the first 7 months is $0.

Next, let's calculate the interest accrued for the remaining period from the beginning of the 8th month until the missed payment is made. The interest rate is given as an Annual Percentage Rate (APR) of 14.25%, which needs to be converted into a monthly interest rate. Let's divide 14.25% by 12 to get the monthly interest rate: 14.25% / 12 = 1.1875%.

Now, we need to calculate the interest accrued for the fraction of the 8th month. If we assume that the payment is missed at the end of the 8th month, then the fraction of the 8th month for which interest is charged is (30 - X)/30, where X is the day of the missed payment. As we do not know the exact day of the missed payment, let's assume it is in the middle of the month, so X = 15. Therefore, the fraction of the 8th month for which interest is charged is (30 - 15)/30 = 15/30 = 0.5.

Now we can calculate the interest accrued for the fraction of the 8th month: 0.5 * (1.1875% * $875.00) = 0.5 * (0.011875 * $875.00) = 0.5 * $10.34 = $5.17.

Therefore, the interest charged for missing the payment in the 8th month is $5.17.

Thus, the correct answer is $5.17, which is not provided among the answer options.

See previous post: Sun, 4-19-15, 7:26 PM.

20.37

To calculate the interest charged, we need to determine the interest accrued on the financed amount of $875.00 for the first 7 months, as well as the interest accrued from the beginning of the 8th month until the missed payment is made.