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A car is purchased on hire-purchase. The cash price is $21 000 and the terms are a deposit of 10% of the price, then the balance to be paid off over 60 equal monthly installments. Interest is charged at 12% p.a. What is the monthly installment?

Correct answer: B. $504

  • A. $503
  • B. $504
  • C. $505
  • D. $506Education

Explanation

The 10% deposit is $21,000 x 10% = $2,100, leaving $18,900. Over 5 years, simple interest is $18,900 x 12% per year x 5 years = $11,340, so the total paid in instalments is $30,240 and each of 60 monthly instalments is $30,240 ÷ 60 = $504. Option a, $503, is usually caused by rounding too early.

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