Job has taken out a time payment plan to buy a stereo for k2500. He pays a deposit of k300 and the contract requires 18 monthly payments of k150.

Question

Find the flat rate interest charged

Answer 1

To find the flat rate interest charged, we first need to calculate the total amount paid by Job over the 18 month period.

Total cost of the stereo = k2500
Deposit paid = k300
Remaining balance = k2500 - k300 = k2200

Monthly payments = k150
Number of months = 18

Total amount paid over 18 months = 18 * k150 = k2700

Total amount paid = k300 (initial deposit) + k2700 (monthly payments) = k3000

Total amount paid above the cost of the stereo = k3000 - k2500 = k500

Flat rate interest = Total amount paid above the cost of the stereo / Total cost of the stereo
Flat rate interest = k500 / k2500 = 0.20 or 20%

Therefore, the flat rate interest charged on the stereo purchase is 20%.