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8 January, 13:51

20. Sarah bought a lawnmower for $320. She signed up for the buy now pay later plan at the store with the following conditions: $100 down and payments of $25 for the next 12 months. The extra cost paid by taking this plan is equivalent to what actual yearly rate of interest?

A. 85%

B. 25%

C. 67%

D. 65%

You answered : B

Correct Answer : C

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Answers (1)
  1. 8 January, 16:20
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    The correct answer is "C".

    If Sarah has decided to make an initial payment of $ 100, this will leave a pending payment of $ 220 (the principal). If Sarah has agreed to pay the remaining amount in monthly installments of $ 25 for the next 12 months. This means she will end up paying $ 300.

    The interest paid for this product is $ 80, representing an annual rate of 67%.
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