Answer:
1) The initial down payment is $1,340
2) The total monthly payment is $7,200
3) The total cost of the jet ski on the installment plan is $8,540
4) The finance charge is $1,840
Step-by-step explanation:
The financing model of Sum-R-Fun for a jet ski are as follows;
Sum-R-Fun selling price of a jet ski = $6,700
The initial down payment = 20% of the selling price of the jet ski
The amount the customer pays per month = $200
The duration or the period of the monthly payment = 3 years
1) The initial down payment = 20/100 × $6,700 = $1,340
2) The total monthly payment = Number of months per year × Number of years × The monthly (installment) payment
∴ The total monthly payment = 12 × 3 × $200 = $7,200
3) The total cost of the jet ski on the installment plan = The initial down payment + The total monthly payment
∴ The total cost of the jet ski on the installment plan = $1,340 + $7,200 = $8,540
4) The finance charge is the cost of the credit given as follows;
The finance charge = The total cost of the jet ski on the installment plan - Sum-R-Fun selling price of a jet ski
∴ The finance charge = $8,540 - $6,700 = $1,840
