Question

lillian made a down payment of $150 on some hockey equipment. the balance of the purchase price was paid for using a deferred payment plan with an 18-month introductory period. the interest rate is 26.79%. if the purchase price of the hockey equipment was $975 and minimum payments of $12 were made during the deferment period, what is the balance after the deferment period? (2 points) $1,011.60 $1,084.80 $1,215.60 $1,227.60

Answer 1

FV =$965.30 balance of the loan after deferment period of 18 months + accrued interest.

What is accrued interest?

Accrued interest is the amount of interest that has been owed on a loan or other financial obligation as of a given date but has not yet been paid. For the lender or the borrower, accumulated interest may take the form of accrued interest revenue or accrued interest expenditure.

If interest free, then we have:

975 - 150 =$825 balance of  the loan after $150 down payment.

$12 x 18 = $216 total payment made during deferment period of 18 months.

$825 - $216 =$609 balance of loan after deferment period of 18 months.

If interest bearing, then we have:

FV=PV[1 + R]^N=FV OF $1 TODAY - FV=P{[1 + R]^N - 1/ R}=FV OF $1 PER PERIOD.

FV=825 x [1+ 0.2679/12]^18         -             FV =12 x {[1+0.2679/12]^18 - 1 / 0.2679/12}

FV = $1,227.60                              -                                 $262.30

FV =$965.30 balance of the loan after deferment period of 18 months + accrued interest.

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