Stereo Inc. sells a stereo system for $200 down and monthly payments of $70 for the next 3 years. If the interest rate is 5.25% per year, find:
a) The cost of the stereo.
Answer = $
b) The total amount of interest paid
The title of your post says "compound interest" but then you use "simple interest".
i = .0525/12 = .004375
n = 36
cost of stereo
= 200 + 70(1 - 1.004375^-36)/.004375
= 200 + 2326.87
= 2526.87
you had that, ok, good
b) paid: = 36*70+200 = 2720
Do they accept 2720 - 2526.87 = 193.13 ??
The question of total amount of interest paid is really not even valid. In this type of financial calculation, you cannot add/subtract sums of money unless they are in the same "time spot".
To find the cost of the stereo, we need to calculate the total amount paid over the 3-year period. This includes the down payment and the monthly payments.
a) The down payment is $200.
b) The total monthly payments can be calculated by multiplying the monthly payment by the number of months in 3 years. There are 12 months in a year, so 3 years would be 3 * 12 = 36 months. The total monthly payments would be $70 * 36 = $2520.
c) To calculate the interest, we need to find the interest paid on both the down payment and the monthly payments.
The interest on the down payment can be calculated by multiplying the down payment by the interest rate. The interest would be $200 * 5.25% = $10.50.
The interest on the monthly payments can be calculated by multiplying the total monthly payments by the interest rate. The interest would be $2520 * 5.25% = $132.30.
d) Finally, we can find the total cost of the stereo by adding the down payment, the total monthly payments, and the total interest paid. The total cost would be $200 + $2520 + $10.50 + $132.30 = $2862.80.
Therefore, the cost of the stereo is $2862.80.
b) The total amount of interest paid is $142.80 ($10.50 + $132.30).
To find the cost of the stereo system, we need to add the down payment to the total of all monthly payments.
First, let's calculate the total cost of the monthly payments over the three-year period. We have a monthly payment of $70 for 3 years, which is a total of 3 * 12 = 36 months.
To calculate the total cost of the monthly payments, multiply the monthly payment by the total number of months:
Total monthly payment = $70 * 36 = $2520
Next, let's calculate the total cost by adding the down payment to the total of the monthly payments:
Cost of the stereo = Down payment + Total monthly payment
Cost of the stereo = $200 + $2520 = $2720
So, the cost of the stereo system is $2720.
To calculate the total amount of interest paid, we need to subtract the initial amount borrowed from the total cost of the stereo system.
The initial amount borrowed would be the total cost minus the down payment:
Initial amount borrowed = Cost of the stereo - Down payment
Initial amount borrowed = $2720 - $200 = $2520
The total amount of interest paid can be calculated using the formula:
Total amount of interest = Initial amount borrowed * Interest rate
First, let's convert the annual interest rate to a monthly rate. Divide the annual interest rate by 12:
Monthly interest rate = Annual interest rate / 12
Monthly interest rate = 5.25% / 12 = 0.004375
Next, multiply the initial amount borrowed by the monthly interest rate to find the total amount of interest paid:
Total amount of interest = Initial amount borrowed * Monthly interest rate
Total amount of interest = $2520 * 0.004375 = $11.025
So, the total amount of interest paid is $11.025.
The cost of the stereo is 2526.87
i just cant figure out the amount of interest paid, i do I=P*R*T and get 397.87 or something like that and it says its wrong