Loan Repayments. (1 Viewer)

[Juliaan]

Store offers $3000 credit with no repayments for 6 months.
Interest = 14.5% p.a, Loan is to be paid back in 2 years.

a) owed on the credit after 6 months, just before the first payment.

Dont understand the no repayments part, can you just briefly explain, thanks.

 

[krazedrealitii]

It means that any customer who takes up this offer will not have to actually pay any money for 6 months. As in, someone might borrow $3000 from that store, but will not have to make a payment until 6 months later.

Let I = 0.145, A = amount owed, P = 3000 and n=time period in terms of months

Since the Interest is 14.5%, and 6 months = 1/2 a year, the amount owed just before the first payment will be worked out using the formula:

A = P x I x (n/12) + P

Subbing in the numbers,

The amount owed on credit after 6 months just before the first payment will be:

A = 3000 x 0.145 x 0.5 + 3000
= 3217.5