Peter buys AC at 900. He pays 20% deposit and the outstanding balance plus interest in 48 months. Interest on the balance is charged 10%. Find the amount he saves by paying cash

100% - 20% = 80% = 0.80.

Po = 0.80 * 900 = $720 = Amt. financed.

P = Po + Po*r*t.
P = 720 + 720*(0.1/12)*48 = $1008.

1008 - 900 = $108 = Amt. saved by paying cash.

Correction:

Total cost = 1008 + 180 = $1188.

1188-900 = $288. = Amt. saved by paying cash.

To find the amount Peter saves by paying cash, we need to compare the total amount he will pay if he chooses to pay in installments with the price of the AC if he pays cash upfront.

Let's break down the calculations step by step:

1. Calculate the deposit amount:
The deposit is 20% of the total price of the AC.
Deposit = 20% * $900 = $180

2. Calculate the balance:
The balance is the remaining amount after paying the deposit.
Balance = Total price - Deposit
Balance = $900 - $180 = $720

3. Calculate the interest on the balance:
The interest on the balance is 10% of the balance amount.
Interest on the balance = 10% * $720 = $72

4. Calculate the total amount paid in installments:
The total amount paid in installments is the sum of the deposit, balance, and the interest on the balance.
Total amount paid in installments = Deposit + Balance + Interest on the balance
Total amount paid in installments = $180 + $720 + $72 = $972

5. Calculate the amount Peter saves by paying cash:
Amount saved = Total price - Total amount paid in installments
Amount saved = $900 - $972 = -$72

From the calculations, we can see that Peter actually doesn't save any money by paying cash. In fact, he would save $72 more by opting for installments with interest.