Your service contract for washer repair maintenance is offered at $48 per year. If a customer wants to pay it off in equal monthly installments for one year and if the true annual interest charge is 18%, what should his monthly payment be?

To determine the monthly payment, you will calculate the interest charge using I=prt.

This will be added to the contract cost and then divided between the 12 months.

I = 48 x 0.18 x 12/12 (1)

I = $8.64

$48 + $8.64 = $54.64

$54.64/12 = $4.55

You will pay about $4.55 per month. The last payment will be $4.59.