3
QuizMultiple Choice

Long Term Purchases

Question 3 • 26-27 Ignite Technical Math-Financial Math - MA2007

Douglas has a credit card with an interest rate of 11.05%, compounded monthly. He used his credit card to buy a new sofa, which cost $670 before the sales tax of 7.94%. Douglas paid off his balance by making equal monthly payments for three years. Assuming that he had no other purchases on his credit card, how much did Douglas pay in total for the sofa? (Round all dollar values to the nearest cent.)

Answer
A
$1,005.93
B
$790.20
C
$723.20
D
$852.84

Explanation

First add sales tax: $670 × 1.0794 = $723.20, the amount Douglas financed. The monthly interest rate is 0.1105 ÷ 12, and he makes 36 payments. Using the installment-payment formula gives a monthly payment of about $23.69; multiplying by 36 gives a total of about $852.84. So the total he paid, including interest, is $852.84.

AI-written and checked against the verified answer.

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