Question

A certain company has purchased new swivel chairs for its employees. The company made the purchase on a credit plan at Buy Right. Their monthly payments are $1,000 for 4 years. Buy Right will charge 2.25% per year compounded monthly. How much was the original total price of the furniture

Answer 1

Answer: $45,862.29

Explanation:

This question relates to the Present value of an Annuity.

The original price would be the present value of the payments and since the payments are constant over a period, they are an annuity

Interest/ r = 2.25/12 months = 0.1875%

Periods/ n = 4 * 12 months = 48 months

= Payment * (( 1 - ( 1 + r) ^ n)/ r)

= 1,000 * (( 1 - ( 1 + 0.1875%)^48) / 0.1875%)

= $45,862.29