Not quite.
Purchase price = 3000.40 : 2500.40 borrowed + 500.00
Interest = 896.92 : 94.37 * 36 - 2500.40
when it says "the first payment is made at the date of signing" what type of annuity is it?
By the way this is the question
Mary purchases a home entertainment centre from Krazy-Krazy Appliance store. She paid $500 down and agreed to pay $94.37 per month for three (3) years. The first payment is made at the date of signing and interest is 22½% compounded monthly.
1. What is the purchase price?
2. How much is the cost of financing?
1.
BGN
-94.37 PMT
1.875 i
36 n
0 FV
COMP
PV
2,500.40
2.
94.37 x 36 = 3,397.32 - (2500.40 +500) = 396.92
Does that look right?
Yes.
BUT there's basically NO difference between end and start of month: "calculation" is SAME,
except the term is reduced by 1 month.
With your example, the loan is "really" 2500.40 - 94.37 = 2406.03 requiring 35 payments;
in other words, same as a down payment of 500.00 + 94.37 = 594.37
Now i am a litle confuse...in my example, is the purchase price 2500.40 or 2406.03? ( did i calculate the purchase price correctly)
According to my calculation if the payment is made @the beginning of the month the purchase price should be 2500.40+500=3000.4
But if the payment is made at the end of the month the purchase rice should be....2454.38 + 500 =2954.38
i am trying to use my head...just a little confused. I guess it helps if i leased something before but can't say that I have. Anyways without looking at the numbers.....I understand that the down payment is part of the purchase price but should not be used to try to figure out the cost of financing because it was not borrowed!