Question

Mr. and Mrs. Chan want to buy new furniture that has a cash price of $6230. On the installment plan, they must pay %25 of the cash price as a down payment and make twelve monthly payments of $415. How much interest did they pay due to financing?

Answer 1

The interest due on financing option is $307.50

What is interest on financing?

Interest on financing is the extra amount paid by the couple when their total payments are compared to the cash price of $6,230.

The total payments would be the 25% down payment plus the sum of the twelve monthly payments of $415 each

Down payment=cash price*25%

Down payment=$6230*25%

Down payment=$1,557.50

Total monthly payments=amount of each monthly payment*number of monthly payments

monthly payment=$415

number of monthly payments=12

Total monthly payments=$415*12

Total monthly payments=$4,980

Total payment under financing=Down payment +Total monthly payments

Total payment under financing=$1,557.50+$4,980

Total payment under financing=$6,537.50

Interest=$6,537.50-$6,230

Interest on financing=$307.50

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