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Click on the math icon to go to the Math Mentor for help with percentages.  

When you finish, return to this page and complete the exercises.

It’s important to know what the actual cost of something will be if interest on a loan is involved.  Let’s say that your TV dies.  The local store is more than willing to finance your purchase of a new one.  The new one will cost $999.00 – you are buying a fancy one.  You can have a year to pay it off.  The loan will be for 6% for the year.  How much will the TV really cost you?

Let’s do the math

999  x  .06 = 59.94  this is the interest you will have to pay in a year

The question is “how much will the TV really cost you” so you need to

add 59.95 to 999.

$ 999.00                       

   +59.94

$1058.94

 Now, try these problems.

1. Harry Thorpe borrowed $500.00 from his sister.  He promised to pay it back during the next three months.  He also insisted on paying her 5% interest.  How much will he need to pay her in total?  How much should he pay her each month?

  ANSWER Total: $525; each month: $175

2.  Mary Gee saw two second-hand Ford trucks.  The first would cost her $3000.00 at 4% for a 12 month period.  The second would cost her $2700.00 at 7% for a  12 month period.  Both are in good shape. If the trucks are in equal shape, which would be the better deal?

  ANSWER First car = $3120; second car = $2889; the second car is the better deal

3. Pedro is on a very tight budget.  He needs a car to get to work, but he can only afford a monthly payment of $150.00  His neighbor offers to sell him his old Chevy for $2000.00 at 7% interest for a year.  Can Pedro afford the car?

  ANSWER 2000 X .07 = 140; 2000 + 140 = 2140; 2140 divided by 12 = 178.33; he can't afford the car

4. Mrs. Rodgers fell in love with a living room set from the local furniture store. The price is so reasonable!  The sofa, two armchairs, a coffee table, and two end tables are on sale for only $499!!  The furniture store will finance it for a year at 0% interest.  However, if the set isn’t paid off in that time, there is a 24% penalty charge.  How much will the living room set cost if Mrs. Rodgers takes 13 months to pay it off?

  ANSWER Penalty = $119.76; total cost = $618.76

5. Robert has two credit cards.  He uses them constantly.  He owes $2000 at 10% a year on the first card.  He owes $3000 at 8% a year on his second card.  The problem is that while Robert makes payments, he also keeps making new purchases using his cards.  Assuming that the money he owes always stays the same, how much will he pay in interest in three years?

ANSWER $1320

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