Brian bought a new air conditioning unit on his credit card. The unit had a base price of $435. Brian made no other purchases on
his credit card. Brian’s credit card has an interest rate of 9.4%, compounded monthly, and Brian paid off the balance by making monthly payments for a year and a half. If the sales tax in Brian’s area is 8.51%, how much did Brian pay in total? (Round all dollar values to the nearest cent.) a. $472.02 b. $468.00 c. $496.32 d. $507.96
Unit base price: $435 Credit Card interest rate, i = 9.4% compounded monthly; i = 0.00783/month comp monthly n = 1.5 years = 18 months sales tax = 8.51%
First, determine the actual price of the unit by adding the sales tax to the base price of the unit:
$435 * (1 + 0.0851) Actual price = $472.0185
So, the total amount paid by Brian should be higher than the actual price since he used his credit card. Use the formula from economics:
F = P (1+i)^n
F = $507.96
Therefore, the total amount paid by Brian is $507.96.