Need help with Interest question?

[Tazook]

20. Lee wishes to purchase a downhill ski package that includes the skis, poles, bindings, and boats. The selling price is \$1894. The finance plan includes a \$150 down payment and payments of \$113 each at the end of the month for

1.5 years. Find the annual interest charge, if the interest charge is
a) monthly compounded b) yearly compounded

Please explain in detail... think I am a martian

 

[Jameson]

Hi Tazook,

Welcome to MHB! :)

We don't fully answer problems here, rather try to help you solve them so let's see what we can do.

Usually with compound interest problems we use the following formula: $$A=P \left(1 +\frac{r}{n} \right)^{nt}$$. However this seems like a slightly different situation.

I found another formula that might apply. Does the one on this Wikipedia page look familiar?

The reason I'm a bit confused is because the term "annual interest charge" is not one I'm familiar with. If we search this exact phrase on Google there are not that many results which makes me think there might be another common name for it.

 

[Tazook]

Thanks for the wiki link... it really cleared everything...