A computer system is priced at $3200. A man buys the computer system on hire purchase according to the following terms: a downpayment of 15% and the remaining to be paid in monthly instalments over 2 years at a simple interest rate of 9.5% per annum.
To calculate the downpayment, we first find 15% of $3200:
Downpayment = 15% of $3200
Downpayment = 0.15 * $3200
Downpayment = $480
The amount remaining to be paid after the downpayment is:
$3200 - $480 = $2720
The total interest to be paid over 2 years can be calculated using the simple interest formula:
Total Interest = Principal x Rate x Time
Total Interest = $2720 x 9.5% x 2 years
Total Interest = $2720 x 0.095 x 2
Total Interest = $517.60
The total amount to be paid over 2 years including the downpayment and interest is:
Total Amount = Downpayment + Principal + Total Interest
Total Amount = $480 + $2720 + $517.60
Total Amount = $3717.60
The monthly instalments will be spread over 24 months, so the monthly payment can be calculated by dividing the total amount by 24:
Monthly Payment = Total Amount / 24
Monthly Payment = $3717.60 / 24
Monthly Payment = $154.90
Therefore, the man will pay a downpayment of $480, and then make monthly payments of $154.90 for the next 24 months to complete the hire purchase of the computer system.