Question

Sarah bought a lawnmower for $320. She signed up for the buy now pay later plan at the store with the following conditions: $100 down and payments of $25 for the next 12 months. The extra cost paid by taking this plan is equivalent to what actual yearly rate of interest? A. 67% B. 65% C. 25% D. 85%

Answer 1

Amount of lawnowner bought by Sarah=$320 Down payment by Sarah= $100 Sarah paid in 12 months = 12 x 25 $ = 300$ $ paid by sarah = 300+12$=400$ Excess amount paid as interest by sarah=400-320=80$ yearly rate of interest paid by sarah = 80/320 x 100=25% so 25% yearly interest was paid by sarah, so the correct option is C. hope this helps.