Financial Maths- Buying on Terms HELP PLZ (1 Viewer)

[princesskt]

Lolz, ok I need some help finding out the interest rate... was wondering if someone can help??

Heres the whole question- (BTW im working from New Century Maths)

Del and Barry bought an old cottage for $11000 and had it transported to their farm in the country. They paid the vendor 10% deposit and agreed to pay him the rest at $85 per week over 5 years.

a) How much did they actually pay for the house?

b) What was the vendor's flat interest rate, correct to 3 sig fig?

-----------------------------------------------------------------

K for a) I got $23200 which is right... but how do I work out b) from here?

 

[PC]

OK.

(a) Deposit = 10% of $11000
= 0.10 x 11000
= $1100
.: Total paid = Deposit + Payments
= 1100 + (85 x 52 x 5)
= $23200

(b) OK ... for this bit, remember that Del and Baz are only charged interest on what they still owe, not the price of the cottage. They've already paid a deposit, so they won't pay interest on what they have already paid back.

Total owing after deposit = 11000 – 1100
= $9900
Total paid = $23200
Interest = 23200 – 11000
= $12200

Now:
I = Prn
12200 = 9900 x r x 5
12200 = 49500 x r
r = 12200 ÷ 49500
= 0.2464646465
= 24.6% p.a. (3 sig figs)

 

[princesskt]

ack I don't get it

 

[princesskt]

hang on, i think i do get it...

 

[princesskt]

Argh the books gay coz it doesnt go through the answers the way excel does... anyways... could you help me with this question too...

The Ripoff Finance company had the following hire purchase agreement with Mr. B Spender:

Cash price of yacht- $17500
Deposit- $450
Trade in allowance on old yacht- $1200
Stamp Duty- $245.30
Registration- $362.50
36 monthly repayments of $680

a) What was the total amount paid for the yacht if the deposit, stamp duty and registration were paid by Mr. Spender at the time of purchase?

b) What was the flat interest rate charged p.a. by the finance company? Answer correct to 1 decimal place (Note: Principal borrowed= cash price-deposit-trade in)

--------------------------------------------

Ack I so don't get this...

well for a) though, I thought it's $17500 + $450 + $245.30 + $362.50... but that doesn't equal the right answer :S or am I just really dumb? lol

 

[princesskt]

but see the answer for a) is 24537.80... how do u get that? ack im confused.. im just gonna sleep n ill come back 2moro lol

 

[watatank]

Oh i misread the question. Hold on. <edits post>

 

[watatank]

a)amount paid on the day is deposit + stamp duty + rego = 450+245.3+362.5 = $1057.80

using total paid for yacht is amount paid on the day ($1057.80) plus the repayments (36*680) = $25537.80.

you have to take into account that you are also putting in your old yacht, so you can effectively take out $1200 out of that amount paid.

so total = 25537.80 - 1200 = $24337.80 (its possible both that i made a slight mistake or the book is wrong)

your interest is paid amount minus cost price.

so interest: $24337.80 - $17500 = $6837.80

after deposit: 17500 - 450 = $17050 still owing (which is your principal)

I = PRN

R = I/(P*N)
= 6837.8/(17050*3)
= 0.134
= 13.4% p.a.

 

[princesskt]

yea well there has been numerous mistakes in the book so im aware of that fact, i just wish it wasnt holidays so i could talk to my teacher (u guys have been great, but its easier in the classroom with a teacher if u know wat i mean lol)

 

[princesskt]

but really thanks heaps... im soo crap at this financial maths stuff.. it sux lol