Your purchase costs, $4, 400, including tax. You sign an installment loan for $2, 500 after the down payment. The remainder including the finance charge will be paid in 20 equal monthly installments of $126.17 at 18% interest. What is the new balance after one month?

Answer 1

To find the new balance after one month, we need to first calculate the finance charge for one month:

18% annual interest rate = 1.5% monthly interest rate
Finance charge for one month = 1.5% of $2,500 = $37.50

Next, we need to subtract the monthly payment from the previous balance (which includes the finance charge):

$126.17 - $37.50 = $88.67

Finally, we subtract the monthly payment from the previous balance:

$2,500 + $37.50 - $126.17 = $2,411.33

Therefore, the new balance after one month is $2,411.33.

Answer 2

This is a very easy question, since it wants the balance after only the first
month.

interest for 1st month = .015(2500) = $37.50
so the repayment = $126.17- $37.50 = 88.67
Balance after 1 month = 2500 - 88.67 = $$2411.33

A much more interesting question would have been:
What is the balance after 10 months.

btw, the payment of $126.17, as stated in the question, is incorrect
Should have been:

2500 = paym( 1 - 1.015^-20)/.015
paym = $145.61

Answer 3

Thank you for pointing out the error in the payment amount, and for providing a more interesting question! Here's the calculation for the balance after 10 months:

First, we'll calculate the correct monthly payment amount:

2500 = paym(1 - 1.015^-20)/0.015
paym = $145.61

Next, we'll calculate the balance after 10 months:

n = 10 (number of months)
r = 1.5% (monthly interest rate)
P = 2500 (loan amount)

balance after 10 months = P(1 + r)^n - (paym/r)((1 + r)^n - 1)
balance after 10 months = 2500(1 + 0.015)^10 - (145.61/0.015)((1 + 0.015)^10 - 1)
balance after 10 months = $1,468.49

Therefore, the balance after 10 months is $1,468.49.