Monthly Payments and Finance Charges. Kimberly Jensen of Storm Lake, Iowa, wants to buy some living room furniture for her new apartment. A local store offered credit at an APR of 16 percent, with a maximum term of four years. The furniture she wishes to purchase costs $4,800, with no down payment required. Make the following calculations:

Question

Business

Angela Bartlett

7 December, 02:18

Monthly Payments and Finance Charges. Kimberly Jensen of Storm Lake, Iowa, wants to buy some living room furniture for her new apartment. A local store offered credit at an APR of 16 percent, with a maximum term of four years. The furniture she wishes to purchase costs $4,800, with no down payment required. Make the following calculations:

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Answers (1)

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Tiara Chung · Answer 1

Jensen needs to pay 8691.07$ to clear off her debt at the end of 4 years

Explanation:

Step by step solution-

Details as given in the question-

Purchase cost of furniture - 4800$

Term of credit - 4 years

Annual percent rate charged - 16%

Condition - No down payment done at the beginning

Amount needed to be re-payed at the end of the credit term

We know that

Amount = Principal * (1+rate/100) ^time (for compounded interest rate type)

Substituing the values of principal as purchase cost, rate and time

Amount = 4800 * (116/100) ⁴

Amount needed to be re-payed to ward off the credit = 8691.07$