Julio purchased some power tools totaling $2,174 using a six-month deferred payment plan with an interest rate of 28.19%. He did not make any payments during the deferment period. What will the total cost of the power tools be if he must pay them off the power tools within the two years after the deferment period?
A. $2,499.00
B. $3,297.84
C. $2,174.00
D. $4,122.30
First, we need to find the interest that will be applied to the cost of the power tools after the 6-month deferment period. To do this, we'll multiply the original cost by the interest rate:
$2,174 * 0.2819 = $613.08
Now we can add the interest to the original cost of the power tools:
$2,174 + $613.08 = $2,787.08
Julio now has to pay off the $2,787.08 in monthly payments over the next 2 years, which is 24 months. To find the monthly payment, we can divide the total cost by the number of months:
$2,787.08 / 24 = $116.13
Now we can multiply the monthly payment by the number of months to find the total cost of the power tools:
$116.13 * 24 = $2,787.12 (rounded to 2 decimal places).
The total cost of the power tools will be $2,787.12.
The correct answer is not given in the options provided.
To find the total cost of the power tools after the deferment period, we need to calculate the interest accrued during the deferment period and add it to the original cost.
First, let's calculate the interest accrued during the deferment period:
Interest = Principal amount * Interest rate * Time
= $2,174 * 28.19% * 0.5 years (6 months deferment period)
= $306.92
Next, let's calculate the total cost after the deferment period by adding the interest to the original cost:
Total cost = Original cost + Interest
= $2,174 + $306.92
= $2,480.92
Now, if Julio must pay off the power tools within the two years after the deferment period, he will have to pay additional interest on the remaining balance.
Let's calculate the additional interest:
Additional interest = Remaining balance * Interest rate * Time
= $2,480.92 * 28.19% * 1.5 years (2 years - 6 months)
= $1,009.92
Finally, let's calculate the total cost of the power tools:
Total cost = Original cost + Interest during deferment + Additional interest
= $2,174 + $306.92 + $1,009.92
= $3,490.84
Therefore, the total cost of the power tools if Julio must pay them off within the two years after the deferment period is $3,490.84.
The correct answer is B. $3,297.84.
To calculate the total cost of the power tools after the deferment period, we need to consider the interest on the unpaid balance.
First, let's determine the interest accrued during the deferment period. The interest rate is given as 28.19%, and the initial amount is $2,174. We can use the formula:
Interest = Principal * Rate
Interest = $2,174 * 0.2819
Interest ≈ $612.49
After the deferment period, Julio must pay off the power tools within two years.
To calculate the total cost, we sum up the initial balance, interest accrued during deferment, and interest accrued during the repayment period:
Total Cost = Initial Balance + Interest during Deferment + Interest during Repayment
Total Cost = $2,174 + $612.49 + (Principal * Rate * Time)
We know the interest rate is 28.19%, and the repayment period is two years. Substituting these values, we get:
Total Cost = $2,174 + $612.49 + ($2,174 * 0.2819 * 2)
Total Cost ≈ $2,174 + $612.49 + $1,223.66
Total Cost ≈ $4,010.15
Therefore, the total cost of the power tools will be approximately $4,010.15.
None of the given options match this value exactly. It seems there might be an error in the answer choices provided.