Answer:
c = $85.94
Total payment = $635.94
Total payment ÷ Number of payment = $26.5.
Step-by-step explanation:
We are given that,
The tax on the machine = $575 with down payment = $25. Also, the rate of interest = 15% i.e. 0.15 and time period = 24 months.
Now, the principal amount = tax - down payment = $575 - $25 = $550.
Then, the monthly payment by the annuity formula is given by,
[tex]c=\frac{r \times PV}{1-(1+r)^{-n} }[/tex]
i.e. [tex]c=\frac{0.15 \times 550}{1-(1+0.15)^{-24} }[/tex]
i.e. [tex]c=\frac{82.5}{1-(1.15)^{-24} }[/tex]
i.e. [tex]c=\frac{82.5}{1-0.035 }[/tex]
i.e. [tex]c=\frac{82.5}{0.965}[/tex]
i.e. [tex]c=85.94[/tex]
Hence, c = $85.94
Thus, total payment = amount financed + c = $550 + $85.94 = $635.94.
So, Total payment ÷ Number of payment = [tex]\frac{635.94}{24}[/tex] = $26.5.
