Question

Your service contract for washer repair maintenance is offered at $48 per year. If a customer wants to pay it off in equal monthly installments for one year and if the true annual interest charge is 18%, what should his monthly payment be?
$4.72
$4.68
$4.39

Answer 1

Answer:

$4.72 per month

Step-by-step explanation:

The true interest rate is how much more he has to give with interest.

Let's find the interest on $48 first.

Let's convert 18% to decimal, that is:

18/100 = 0.18

Now, to find 18% of $48, we multiply, so,

Interest = $48 * 0.18 = $8.64

In total, he has to pay:

48 + 8.64 = $56.64

This is spread over 12 months (since he has to pay in 1 year), so each month payment would be:

56.64/12 = $4.72 per month