Edgar purchased a ling room set for $4,258 using a 12-month deffered payment plan. The interest rate after the introductory period is 18.70%. A down payment of $325 is required as well as a minimum monthly payment of $117. What is the balance agter the introductory period if only the minimum payment is made until then?
Are you the same person that posted another question about "Fiona installing a swimming pool"?
If the conditions on that one are the same as this one, then it is calculated wrong.
On this one, Edgar doesn't have to pay anything for 12 months. THEN the interest rate of 18.70% kicks in. First, he must pay a down payment of $325 PLUS one month's minimum payment of $117 dollars. So, we have:
$4258 - 325 =$3,933 the balance of loan. And on top of that, Edgar will have to pay one month's minimum payment of $117 @ 18.70% compounded monthly(I am assuming!). 18.70/12 =1.55833...., this is the nominal monthly rate. You multiply this as decimal(1.55833/100=0.0155833 x $3,933 =$61.29, which is the interest on loan for 1 month. Then you subtract this from $117 to get the principal, which will be applied to the loan:$117 - $61.29 =$55.71. Finally:
$3,933 - $55.71 =$3,877.29, which is the balance of the loan after the down payment and one month's payment are taken off.
