Question

A customer charges a treadmill at Annie's Sport Shop. The price is $4,000 and thefinancing charge is 6% per annum if the bill is not paid in 30 days. The customer fails topay the bill within 30 days and a finance charge is added to the customer's account.What is the amount of the finance charge?
a.$8
b.$20
c.$80
d.$240

Answer 1

We have been given that a customer charges a treadmill at Annie's Sport Shop. The price is $4,000 and the financing charge is 6% per annum if the bill is not paid in 30 days. We asked to find the amount of finance charges.

We will use simple interest formula to solve our given problem.

$I=Prt$, where

I = Amount of interest,

P = Principal amount,

r = Annual interest rate in decimal form,

t = Time in years.

$6\%=\frac{6}{100}=0.06$

Since our time if given in days, so we need to convert 30 days into year.

1 year = 365 days,

30 days = $\frac{30}{365}$ year

Upon substituting our given values in simple interest formula, we will get:

$I=\ 4000\times 0.06\times \frac{30}{365}$

$I=\ 240\times 0.08219178082$

$I=\ 19.7260273968$

Upon rounding to nearest whole number, we will get:

$I\approx \ 20$

Therefore, the amount of finance charge will be $20 and option 'b' is the correct choice.