Janet Foster bought a computer and printer at Computerland. The printer had a $5
ID: 1168842 • Letter: J
Question
Janet Foster bought a computer and printer at Computerland. The printer had a $500 list price with a $100 trade discount and 2/10, n/30 terms. The computer had a $1,700 list price with a 25% trade discount but no cash discount. On the computer, Computerland offered Janet the choice of (1) paying $65 per month for 17 months with the 18th payment paying the remainder of the balance or (2) paying 10% interest for 18 months in equal payments.
Assume Janet could borrow the money for the printer at 10% to take advantage of the cash discount. How much would Janet save? (Use 360 days a year. Round your answer to the nearest cent.)
On the computer, what is the difference in the final payment between choices 1 and 2? (Round your answer to the nearest cent.)
a.Assume Janet could borrow the money for the printer at 10% to take advantage of the cash discount. How much would Janet save? (Use 360 days a year. Round your answer to the nearest cent.)
Explanation / Answer
= 400
Interest is paid for 30-10 = 20 days
Cash discount received = net amount payable x discount rate
= 400 x 2%
= 8
Net amount payable after cash discount = 400 -8
= 392
Amount needs to be borrowed will be equal to the net amount payable after cash discount.
Total Interest paid = amount borrowed x annual rate x no. of years
= 392 x 10% x20/360
=2.18
Net savings = cash discount received – interest paid
= 8-2.18
= 5.82
= 1275
Monthly payment = 65
Total payment in 17 months = 17 x65
=1105
Final payment in 18th month = cost – total payment made
= 1275-1105
= 170
Interest for 18 months = cost x interest rate x period
= 1275 x 10% x 18/12
= 191.25
Total amount paid in 18 months = 1275 +191.25
= 1466.25
Final payment in 18th month = total payment / no. of months
= 1466.25/18
=81.46
Difference in final payment = 191.25 – 81.46
= 109.79
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