Hire Purchase problem

[kleopatra]

Hi everyone, could you guys help me with part D and E of this problem ?

 

[Deleted member 4993]

Hi everyone, could you guys help me with part D and E of this problem ?


View attachment 18457

What is the definition of "flat-rate of interest"? Please show us how did you arrive at 7.96%?

Please share your work/thoughts about this assignment.

 

[kleopatra]

To my knowledge flat-rate of interest is the interest rate on simple interest.

Part A:

Deposit of 5000 + 360 * 60 (which is 12 months * 5 years) = 26600

Part B:

Total paid by the hire-purchase scheme - Cash price = 26600 - 18000 = 8600

Part C:

Going by the formula of simple interest rate, r = I * 100 / P * T
P= 360*60 (12 months * 5 years)
Interest= 8600
Time= 5 years
r= (8600 * 100) / (21600 * 5) = 7.96%

 

[Deleted member 4993]

To my knowledge flat-rate of interest is the interest rate on simple interest.

Part A:
Deposit of 5000 + 360 * 60 (which is 12 months * 5 years) = 26600

Part B:
Total paid by the hire-purchase scheme - Cash price = 26600 - 18000 = 8600

Part C:
Going by the formula of simple interest rate, r = I * 100 / P * T
P= 360*60 (12 months * 5 years)
Interest= 8600
Time= 5 years
r= (8600 * 100) / (21600 * 5) = 7.96%

For part C

Amount borrowed P = 18000 - 5000 = $13000

Interest payment I = $8600

Time = t = 5 years

I = P * r * t \(\displaystyle \ \ \to \ \ \) r = I/(P*t) = 8600/(13000 * 5) = 0.1323 = 13.23% per year

 

[kleopatra]

For part C

Amount borrowed P = 18000 - 5000 = $13000

Interest payment I = $8600

Time = t = 5 years

I = P * r * t \(\displaystyle \ \ \to \ \ \) r = I/(P*t) = 8600/(13000 * 5) = 0.1323 = 13.23% per year

18000 is the cash price which is the option 1, we only have to deal with the hire purchase and the option 2 of the car purchase. Im pretty sure untill part C my work is correct. However i will double check it with my peers to see your option