The total purchase price of a new home entertainment system is $14 comma 230. If the down payment is $2300 and the balance is to be financed over 72 months at 5% add-on interest, what is the monthly payment?

the monthly payment is $192

Step-by-step explanation:

The cost of the new home entertainment system is $14230.

If the down payment is $2300, then the balance to be paid would be

14230 - 2300 = $11930

We would apply the periodic interest rate formula which is expressed as

P = a/[{(1+r)^n]-1}/{r(1+r)^n}]

Where

P represents the monthly payments.

a represents the amount of the balance

r represents the annual rate.

n represents number of monthly payments. Therefore

a = $11930

r = 0.05/12 = 0.0042

n = 72 months

Therefore,

P = 11930/[{(1+0.0042)^72]-1}/{0.0042(1 + 0.0042)^72}]

11930/[{(1.0042)^72]-1}/{0.0042(1.0042)^72}]

P = 11930/{1.352 -1}/[0.0042(1.352)]

P = 11930/(0.353/0.0056784)

P = 11930/62.125

P = $192

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