Question 1120932
the guitar costs 24000.


ali pays 6000 down.


he owes 18000 at 12% per year simple interest for 3 years.


simple interest is calculated off the principal, unlike compound interest which is calculated off the remaining balance of the loan.



the simple interest formula is i = p * r * n


i is the interest
p is the principal
r is the interest rate per time period
n is the number of time periods.


in this problem, the principal is 18000 and the interest is 12% per year and the number of years is 3.


12% per year is the percent interest rate.
the interest rate is the percent / 100 = .12 per year.


the formula becomes:


i = 18000 * .12 * 3.


solve for i to get i = 6480.


the total that needs to be payed is the principal plus the interest.


that comes out to be 18000 + 6480 = 24480.


his monthly payment will be 24480 / (3 * 12) = 24480 / 36 = 680.


an alternate method would have been to translate everything to monthly time periods up front.


p = 18000
r = .12 / 12 = .01 per month.
n = 12 * 3 = 36 months.


the formula then becomes i = 18000 * .01 * 36 = 6480.


the payment is the same at (18000 + 6480) / 36 = 680 per month.