1. Installment Buying
When you buy in installments you pay some money (a down payment) at the
time of purchasing the item and the rest of the price in equal amounts
(called installments) over a given number of equal time periods. There are
usually fees charged as well.
Installment price = payments + down payment + fees
Financing charge = Installment price ­ cash selling price
Installment buying is a form of buying on credit.
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2. Example 1
A warehouse offers customers the option of purchasing furniture in
installments. Fatima decides to buy a DVD player. The cash price is $389.83
plus taxes. The installment price is $50.00 down and $75.00 a month for 6
months. GST is 6% and PST is 7%.
a) Calculate the installment price.
b) Calculate the financing charge.
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3. Example 2
To purchase a sofa and chair at a store has a cash­selling price of $1288.21
plus taxes. The installments terms are $200.00 down plus $125.00 a month for
8 months.
a) Calculate the installment price
b) Calculate the financing charge
c) Calculate the % rate the installment price exceeds the cash price.
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4. Example 2
A sofa and chair at a has a cash­selling price of $1288.21 plus (13% taxes).
The installments terms are $200.00 down plus $180.34 a month for 8 months.
There is an administration fee of $75.00.
a) Calculate the installment price
b) Calculate the financing charge
c) Calculate the % rate the installment price exceeds the cash price.
a) Installment price = payments + down payment + fees
= 8($180.34) + $200.00 + $75.00
= $1442.72 + $200.00 + $75.00
= $1717.72
b) Cash price = sticker price + taxes
= $1288.21 + (.13)($1288.21) Remember 13% = 13 = 0.13
= $1455.68 100
Financing charge = Installment price ­ cash price
= $1717.72 ­ $1455.68
= $262.04
c) % rate: Ask: $262.04 is what % of $1455.68? $262.04 %
$1455.68 100
% = 18%
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5. Assignment
Read page 51­53
Page 56 Questions 1­4
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