Lillian made a down payment of $150 on some hockey equipment. The balance of the purchase price was paid for using a deferred payment plan with an 18-month introductory period. The interest rate is 26.79%. If the purchase price of the hockey equipment was $975 and minimum payments of $12 were made during the degerment period, what is the balance after the deferment period?
This qusetion is rather vague!. Is the deferment period interest free, or interest bearing??
If interest free, then we have:
975 - 150 =$825 balance of the loan after $150 down payment.
$12 x 18 = $216 total payment made during deferment period of 18 months.
$825 - $216 =$609 balance of loan after deferment period of 18 months.
If interest bearing, then we have:
FV=PV[1 + R]^N=FV OF $1 TODAY - FV=P{[1 + R]^N - 1/ R}=FV OF $1 PER PERIOD.
FV=825 x [1+ 0.2679/12]^18 - FV =12 x {[1+0.2679/12]^18 - 1 / 0.2679/12}
FV = $1,227.60 - $262.30
FV =$965.30 balance of the loan after deferment period of 18 months + accrued interest.
