SOLUTION: John wants to buy a car on hire purchase for N$75,000.00 at the rate of 10% p.a. repayable using monthly installments for a period of 2 years and 8 months. (No deposit was required

Click here to see ALL problems on Money Word Problems

Question 1194125: John wants to buy a car on hire purchase for N$75,000.00 at the rate of 10% p.a. repayable using monthly installments for a period of 2 years and 8 months. (No deposit was required). Use the given information to calculate the:
Total amount of money expected to be paid to the Hire Purchase Company over the years.
Found 2 solutions by parmen, ikleyn:
Answer by parmen(42)   (Show Source):
You can put this solution on YOUR website!
**1. Calculate the Total Repayment Period in Months:**
* 2 years * 12 months/year + 8 months = 32 months
**2. Calculate Total Interest:**
* **Annual Interest:** N$75,000 * 10% = N$7,500
* **Total Interest (Approximate):** N$7,500 * (32/12) = N$20,000
* **Note:** This is a simplified calculation of interest. In reality, interest rates in hire purchase agreements can be calculated differently (e.g., reducing balance method).
**3. Calculate Total Amount to be Paid:**
* Car Price + Total Interest = N$75,000 + N$20,000 = N$95,000
**Therefore, the total amount of money expected to be paid to the Hire Purchase Company over the years is N$95,000.**

Answer by ikleyn(52866)   (Show Source):
You can put this solution on YOUR website!
.
John wants to buy a car on hire purchase for N$75,000.00 at the rate of 10% p.a. repayable using
monthly installments for a period of 2 years and 8 months. (No deposit was required).
Use the given information to calculate the total amount of money expected to be paid
to the Hire Purchase Company over the years.
~~~~~~~~~~~~~~~~~~~~~~~~

        I do not think that this problem is for simple interest.

        As this problem is worded, it is a typical loan problem and should be solved as a loan problem
        by different way comparing with the post by the other tutor.

Use the standard formula for the monthly payment for a loan M = where P is the loan amount; r = is the effective interest rate per month; n is the number of payments (same as the number of months); M is the monthly payment. In this problem P = $75000; r = ; n = 2*12+8 = 32 is the number of monthly payments. Substitute these values into the formula and get the monthly payment M = = $2679.82 (rounded). Thus, the monthly payment is $2679.82 (the monthly installment) The total amount of money expected to be paid is 32 times this monthly installment 32 * 2679.82 = 85,754.24 dollars. The difference $85,754.24 - $75,000 = $10754.24 is the interest John pays to the Hire Purchase Company. ANSWER. The total amount of money expected to be paid to the Hire Purchase Company is 85,754.24 dollars.

Solved.