Question

Sara is looking to purchase a washer and dryer. The Saturday newspaper had an advertisement for a local appliance store offering "90 days, same as cashr financing Sara asked how the financing worked and learned that she could pay for the washer and dryer any time during the first 90 days for the purchase price plus sales tax. If she waited longer, she would have to pay the purchase price, plus sales tax, plus 25.8% annual simple interest for the first 90 days, plus 4% simple interest per month (or any part of a month) on the unpaid balance after 90 days. Together, the washer and dryer cost $699 plus the 8.25% sales tax, Sara knew that her tax refund from the IRS would be $1,100, so she bought the washer and dryer confident that she could pay off the balance within the 90 days. Answer parts 1. through 4. 4. How much did it cost her to pay off this loan 14 days late? $ 81.03 cost of extra 14 days (Round to the nearest cent as needed.) What annual simple interest rate does this amount to? (Round to four decimal places as needed)

Answer 1

Given Credit period Interest rate for first 90 days (R1) Interest rate after 90 days - month or part of month (R2) Washer and dryer Cost Sales Tax 90 days 25.80% per annum 4.00% per month $699 8.25% Solution 4 Step 1: Calculate total cost of Washer and dryer PARTICULARS Washer and dryer Cost Add: Sales Tax (699 X 8.25%) Total Cost AMOUNT $699.00 $57.67 $756.67 Step 2: Calculate Interest PARTICULARS Interest for first 90 days Interest for 14 days after 90 days Total Interest for (90 + 14) 104 days Annual Simple interest rate AMOUNT 48.14 30.27 78.40 36.3654% where, Interest for first 90 days Interest for 14 days after 90 days Annual Simple interest rate (14 days late) Total Cost X R1 X 90 365 Total Cost X R2 Total Interest X 365 Total Cost X 104 Hence, $78.40 is cost of extra 14 days It amount to Annual Simple rate of 36.3654%