#### richiesmasher

##### Junior Member

- Joined
- Dec 15, 2017

- Messages
- 111

Hey, I have a question here and I'm mad at myself I can't figure it out, it's literally on the easy section.

It goes, : ''The cash price of a computer is $12480. It can also be bought on hire purchase by making a 25% deposit and paying simple interest that is equivalent to 20% on the outstanding balance which must be repaid in 18 equal monthly installments.''

Calculate (i) the deposit paid, (ii) the outstanding balance (iii) the balance to be repaid.

There's two extra part to this question but I can figure it out.

My problem is part (iii).

I worked out the deposit to be $3120, and the outstanding balance to be $9360.

So now to get the balance to be repaid, I get 20% of 9360 and multiply it by 18.

This will give me $33696.

This is wrong.

I then convert 18 months to years, 2.5 years.

I multiply my 20% value by that instead, I get $4680.

Still wrong.

What is the secret behind this? I know it's not hard, I just feel like I'm lacking a fundamental understanding on how these interest and hire purchase questions work.

Edit: I've figured it out, I did ($9360 *20%*1/18)/100 then multiplied that answer by 18, then added that to 9360.

But now my question is, why does that work, why does using one month as the time frame in the simple interest formula get me to that answer?

My instinct was to use all 18 months

It goes, : ''The cash price of a computer is $12480. It can also be bought on hire purchase by making a 25% deposit and paying simple interest that is equivalent to 20% on the outstanding balance which must be repaid in 18 equal monthly installments.''

Calculate (i) the deposit paid, (ii) the outstanding balance (iii) the balance to be repaid.

There's two extra part to this question but I can figure it out.

My problem is part (iii).

I worked out the deposit to be $3120, and the outstanding balance to be $9360.

So now to get the balance to be repaid, I get 20% of 9360 and multiply it by 18.

This will give me $33696.

This is wrong.

I then convert 18 months to years, 2.5 years.

I multiply my 20% value by that instead, I get $4680.

Still wrong.

What is the secret behind this? I know it's not hard, I just feel like I'm lacking a fundamental understanding on how these interest and hire purchase questions work.

Edit: I've figured it out, I did ($9360 *20%*1/18)/100 then multiplied that answer by 18, then added that to 9360.

But now my question is, why does that work, why does using one month as the time frame in the simple interest formula get me to that answer?

My instinct was to use all 18 months

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