Really need help with this: 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

Really need help with this: 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 get the answer, I can't find anyone who can get it.)
$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 in this scenario, we need to break down the calculations step by step.

Step 1: Calculate the total amount paid for the computer including sales tax.
The computer costs $875.00, and sales tax is 5%. So, the total amount paid is:

$875.00 + (5% of $875.00) = $875.00 + $43.75 = $918.75

Step 2: Calculate the amount financed.
Since you decided to finance the computer, you will only be paying a portion of the total amount upfront and finance the rest. Therefore, the amount financed is:

$918.75 - $100.00 (paid upfront) = $818.75

Step 3: Calculate the number of months you missed the payment.
In this case, you missed the payment in the eighth month. So, the number of months you missed is 8.

Step 4: Calculate the interest rate per month.
The Annual Percentage Rate (APR) is given as 14.25%. To calculate the monthly interest rate, divide the APR by 12 months:

14.25% / 12 = 1.1875%

Step 5: Calculate the interest accrued up to the eighth month.
To calculate the interest accrued, we need to consider two parts: the interest on the financed amount and the interest on the late fee.

Interest on the financed amount:
For the first seven months, the interest accrued on the financed amount is:

($818.75) * (1.1875% per month) * (7 months) = $72.73

Interest on the late fee:
The late fee is $39.00. For each month missed, the interest accrued on the late fee is:

($39.00) * (1.1875% per month) * (8 months) = $3.12

Step 6: Calculate the total interest charged.
Adding the interest on the financed amount and the interest on the late fee:

$72.73 + $3.12 = $75.85

Therefore, the amount of interest charged for missing the payment in the eighth month is $75.85.

Considering the answer choices provided, none of them match the correct answer.