Question

**Is my answer right guys :c


Sandy purchased a dining room set for $1,140 using a 12-month deferred payment plan with an interest rate of 26.78%. She did not make any payments during the deferment period. What will the total cost of the dining room set be if she must pay off the dining room set within two years after the deferment period?

$1,140.00

$1,485.70<---

$1,935.12

$2,902.68

Answer 1

I used http://www.asa.org/repay/calculators/defer/

Answer 2

did you try solving it on that website

Answer 3

$1,485.70 is the balance after the deferment period is over

Answer 4

this is NOT the total cost since the total cost will be higher

Answer 5

you basically have this timeline

Answer 6

point A is the point in time when you purchased the dining room set (so your balance goes from $0 to $1,140)

The period between point A and B is known as the deferment period. This is when you don't have to make any payments at all. Keep in mind that interest is still accruing here.

At point B is when the deferment period is over and when you have to start making payments. At point B, the balance is $1,485.70

Point C is when you have fully paid off the entire debt. The balance at point C is $0 and the total amount you paid back (principal + interest) is the total cost of the dining set.

Answer 7

O.o I don't get it . Can I get the formula

Answer 8

think of $1,485.70 as the starting balance (not $1,140 as the starting balance)

it's not the same as the total cost because you've yet to pay interest on it

Answer 9

my suggestion is to find the monthly payment, then use this to find the total cost

Answer 10

if you're still stuck, then use this formula


P = L((r/n)*(1 + r/n)^(n*t))/((1 + r/n)^(n*t) - 1)


where,


P = monthly payment

L = total amount loaned or amortized

r = annual interest rate (APR)

n = number of times interest is compounded per year (compounding frequency)

t = time in years

Answer 11

what will be my loan amount ?

Answer 12

the loan amount is the starting balance (after the deferment period is over), so

L = 1485.70

Answer 13

and Principal = 1,140 ?

Answer 14

@jim_thompson5910 http://www.wolframalpha.com/input/?i=P+%3D+1485.70%280.2678%29%2F%2812%29%29*%281+%2B+%280.2678%29%2F12%29%29%5E%2812*2%29%2F%281+%2B+%280.2678%29%2F%2812%29%29%5E%2812*2%29+-+1%29

Answer 15

use these values

P = unknown
L = 1485.70
r = 0.2678
n = 12
t = 2

Answer 16

I did , I plug them into or did i plug them in wrong ?

Answer 17

yeah you plugged them in wrong unfortunately

Answer 18

I got it is my answer 1,935.12 ?

Answer 19

I got 1936.24 on the calculator

Answer 20

that's way too high for the monthly payment

Answer 21

what did you get for the monthly payment?

Answer 22

I used this http://easycalculation.com/mortgage/loan-balance.php

Answer 23

you use that calculator if you know the monthly payment

Answer 24

but we don't know that yet

Answer 25

how do I get the monthly payment ?

Answer 26

that calculator says it's used "to calculate the loan balance after n payments"

Answer 27

use the formula I gave you and keep the parenthesis in mind

Answer 28

I did I got 32.1559

Answer 29

@jim_thompson5910 $1,140.00 ?

Answer 30

use this calculator to figure out the monthly payment

http://www.bankrate.com/calculators/mortgages/loan-calculator.aspx