Bill Seeker bought a boat costing $8500 with $1500 down, the balance plus add-on interest to be paid in 36 monthly installments. If the add-on interest rate was 18% find A. the total interest charged. b. the monthly payment, to the nearest dollar
a 1266 b 230
To find the total interest charged, we need to calculate the interest rate based on the add-on interest formula, which is:
Total Interest = Principal Amount x Rate x Time
In this case, the principal amount is the balance after the down payment, which is the total cost of the boat minus the down payment. So, the principal amount is $8500 - $1500 = $7000.
The interest rate is given as 18%, but note that add-on interest is usually represented as an annual rate, so to convert it to a monthly rate, we divide it by 12. Therefore, the monthly interest rate is (18% / 12) = 1.5%.
The time is the number of monthly installments, which is 36.
Using the add-on interest formula, we can calculate the total interest charged:
Total Interest = Principal Amount x Rate x Time
Total Interest = $7000 x 1.5% x 36
Now, let's calculate the total interest charged:
Total Interest = $7000 x 0.015 x 36
Total Interest = $3780
Therefore, the total interest charged is $3780.
To find the monthly payment, we need to add the total interest charged to the principal amount and then divide it by the number of installments:
Principal + Total Interest = $7000 + $3780 = $10780
Monthly Payment = (Principal + Total Interest) / Number of Installments
Monthly Payment = $10780 / 36
Now, let's calculate the monthly payment:
Monthly Payment = $10780 / 36
Monthly Payment ≈ $299 (rounded to the nearest dollar)
Therefore, the monthly payment, rounded to the nearest dollar, is $299.