Joe has taken out a time payment plan to buy a stereo for 2500.He pays a deposit of 300 and the contract requires 18 monthly payments of 150. Calculate the flat-rate interest charged?
To calculate the total amount Joe will pay for the stereo, we first need to find the total amount of the monthly payments.
18 payments of 150 each: 18 * 150 = 2700
Adding the deposit: 2700 + 300 = 3000
Therefore, Joe will pay a total of 3000 for the stereo.
To find the flat-rate interest charged, we need to subtract the original price of the stereo from the total amount Joe will pay:
3000 - 2500 = 500
Therefore, the flat-rate interest charged on the stereo is 500.
Use this formula: I = P × r × T.
Where: P is the principal, r is the rate, and T is the term. Use it to find the interest rate
We already know the principal amount (P) is 2500, the total amount paid is 3000, and the term (T) is 18 monthly payments.
Now, let's calculate the interest rate (r):
I = P * r * T
500 = 2500 * r * 18
500 = 45000r
r = 500 / 45000
r = 0.0111 or 1.11%
Therefore, the flat-rate interest charged is 1.11%.
T is 1.5 years
Given T = 1.5 years and the term is in months, we need to convert 1.5 years to months:
1 year = 12 months
0.5 years = 6 months
1.5 years = 18 months
Now, we can substitute the values into the formula to find the interest rate:
500 = 2500 * r * 18
500 = 45000r
r = 500 / 45000
r = 0.0111 or 1.11%
Therefore, the flat-rate interest charged is 1.11%.