Job has taken out a time payment plan to buy a stereo for k2500. He pays a deposit of k300 and the contract requires 18 monthly payments of k150.
Find the flat rate interest charged
To find the flat rate interest charged, we first need to calculate the total amount paid by Job over the 18 month period.
Total cost of the stereo = k2500
Deposit paid = k300
Remaining balance = k2500 - k300 = k2200
Monthly payments = k150
Number of months = 18
Total amount paid over 18 months = 18 * k150 = k2700
Total amount paid = k300 (initial deposit) + k2700 (monthly payments) = k3000
Total amount paid above the cost of the stereo = k3000 - k2500 = k500
Flat rate interest = Total amount paid above the cost of the stereo / Total cost of the stereo
Flat rate interest = k500 / k2500 = 0.20 or 20%
Therefore, the flat rate interest charged on the stereo purchase is 20%.