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27 February, 16:04

Monthly Payments and Finance Charges. Kimberly Jensen of Storm Lake, Iowa, wants to buy some living room furniture for her new apartment. A local store offered credit at an APR of 16 percent, with a maximum term of four years. The furniture she wishes to purchase costs $4,800, with no down payment required. Make the following calculations:

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  1. 27 February, 16:28
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    Jensen needs to pay 8691.07$ to clear off her debt at the end of 4 years

    Explanation:

    Step by step solution-

    Details as given in the question-

    Purchase cost of furniture - 4800$

    Term of credit - 4 years

    Annual percent rate charged - 16%

    Condition - No down payment done at the beginning

    Amount needed to be re-payed at the end of the credit term

    We know that

    Amount = Principal * (1+rate/100) ^time (for compounded interest rate type)

    Substituing the values of principal as purchase cost, rate and time

    Amount = 4800 * (116/100) ⁴

    Amount needed to be re-payed to ward off the credit = 8691.07$
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