Your original purchase price was $950.00 plus 5% sales tax. You enter into an agreement where the interest (12.5% APR) is waived for the first 12 months provided you make the required monthly payments; otherwise the interest is accrued from the date of purchase. You missed the first payment due date. The late fee is $35.00. How much is the interest?
To calculate the interest in this scenario, we need to consider two conditions:
1. If the monthly payment is made on time, the interest will be waived for the first 12 months.
2. If the monthly payment is not made on time, the interest will be accrued from the date of purchase.
In this case, since you missed the first payment due date, the interest will be accrued from the date of purchase.
Let's break down the calculation step-by-step:
1. Calculate the amount of sales tax:
Since the original purchase price was $950.00 and the sales tax is 5%, we can calculate the sales tax amount as follows:
Sales tax = Original purchase price * (Sales tax rate / 100)
= $950.00 * (5 / 100)
= $47.50
2. Calculate the total amount paid at the time of purchase:
Total amount paid at the time of purchase = Original purchase price + Sales tax
= $950.00 + $47.50
= $997.50
3. Calculate the interest accrued:
Interest accrued = Total amount paid at the time of purchase * (APR / 100) = $997.50 * (12.5 / 100)
= $124.69
So, the amount of interest accrued due to missing the first payment is $124.69.