Question

Stereo Inc. sells a stereo system for $600 down and monthly payments of $60 for the next 2 years. If the interest rate is 2.25% per month, find:
a) The cost of the stereo.

b) The total amount of interest paid.

Answer 1

a)	Cost of the stereo	=	Down payment	+	Present value of monthly payment
		=	$     600.00	+	$ 1,103.34
		=	$ 1,703.34
	Working:
	Present value of monthly payment		=-pv(rate,nper,pmt,fv)			Where,
			= $ 1,103.34			rate	=	2.25%
						nper	=	24
						pmt	=	60
						fv	=	0
b)	Interest paid	=	Total repayment	-	Present value of cash flow
		=	$       2,040	-	$ 1,703.34
		=	$     336.66
	Working:
	Total repayment	=	$     600.00	+	$             60	*	24
		=	$       2,040