An outside supplier offers to provide Epsilon with all the units it needs at $64.50 per unit. If Epsilon buys from the supplier,
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Interest is the charge that is levied on the principal at a fixed percentage. The percentage of interest in the lifetime cost of the laptop is 13.7%.
<h3>What is interest?</h3>Interest is the payment that the borrower incurs as a percentage of the principal for borrowing money.
Compound interest refers to the interest calculated on the principal and the interest up to the current interest period. The compound interest can be calculated using the formula:
, where P is the principal amount, r is the rate of interest, n is the number of times the interest is compounded, and t is the tenure. The total number of period is represented as nt.
The total lifetime cost of the laptop will be the combination of its purchase price, interest, and electricity expense.
Given,
The value of the laptop (P) is $779
The number of years of the loan is 2.5 years.
The APR is 11.27%.
The interest on the laptop will be:
The electricity charges for 6 years will be calculated as the product of electricity charges per day and the number of days in 6 years.
Total number of days will be calculated as:
Therefore electricity charges will be:
Hence the total lifetime value of the laptop is:
The percentage of interest in total lifetime value is:
The difference in answers could be a result of rounding. Therefore the correct option is b.
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