Asked by Sarah Regan on May 15, 2024
Verified
Jerry buys a $2,700 motorcycle on a deferred payment plan.There is no down payment and no interest for 18 months.Jerry must make a minimum payment of $75 a month.To avoid a retroactive APR of 21%,he must pay the balance in full before the 18 months has passed.If he pays $75 each month,how much should he pay the last month to avoid the interest charges?
A) $1,350
B) $1,425
C) $1,500
D) $2,075
Deferred Payment Plan
A payment arrangement that allows a purchaser to pay for goods or services at a later date, often after receiving some form of benefit from them.
Retroactive APR
Annual Percentage Rate that is applied to charges made previously, often after a promotional period ends or due to a late payment.
- Evaluate the total financial commitment and interest on loans and installment plans.
Verified Answer
SB
Shauna BohrenMay 18, 2024
Final Answer :
B
Explanation :
Since Jerry needs to pay off the balance in full before the 18 months has passed, he has a total of 18 months to make payments.
Since he pays $75 each month, he will have paid a total of $75 x 18 = $1,350 by the end of 18 months.
To avoid the retroactive APR of 21%, Jerry should pay the balance in full by the end of the 18 months.
Therefore, he should pay a final payment of:
$2,700 (original price) - $1,350 (already paid) = $1,350
So the answer is B) $1,425, which is $1,350 for the remaining balance plus $75 for the final month's minimum payment.
Since he pays $75 each month, he will have paid a total of $75 x 18 = $1,350 by the end of 18 months.
To avoid the retroactive APR of 21%, Jerry should pay the balance in full by the end of the 18 months.
Therefore, he should pay a final payment of:
$2,700 (original price) - $1,350 (already paid) = $1,350
So the answer is B) $1,425, which is $1,350 for the remaining balance plus $75 for the final month's minimum payment.
Learning Objectives
- Evaluate the total financial commitment and interest on loans and installment plans.