The cost of the stereo is 2526.87
i just cant figure out the amount of interest paid, i do I=P*R*T and get 397.87 or something like that and it says its wrong
Stereo Inc. sells a stereo system for $200 down and monthly payments of $70 for the next 3 years. If the interest rate is 5.25% per year, find:
a) The cost of the stereo.
Answer = $
b) The total amount of interest paid
2 answers
The title of your post says "compound interest" but then you use "simple interest".
i = .0525/12 = .004375
n = 36
cost of stereo
= 200 + 70(1 - 1.004375^-36)/.004375
= 200 + 2326.87
= 2526.87
you had that, ok, good
b) paid: = 36*70+200 = 2720
Do they accept 2720 - 2526.87 = 193.13 ??
The question of total amount of interest paid is really not even valid. In this type of financial calculation, you cannot add/subtract sums of money unless they are in the same "time spot".
i = .0525/12 = .004375
n = 36
cost of stereo
= 200 + 70(1 - 1.004375^-36)/.004375
= 200 + 2326.87
= 2526.87
you had that, ok, good
b) paid: = 36*70+200 = 2720
Do they accept 2720 - 2526.87 = 193.13 ??
The question of total amount of interest paid is really not even valid. In this type of financial calculation, you cannot add/subtract sums of money unless they are in the same "time spot".