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Financial Maths, STD2 EQ-Bank 20

Kimberley uses a buy now, pay later payment option to make a purchase of $100. Her repayments are split across 4 equal payments over 6 weeks. No interest is charged.

Kimberley misses her final payment and is charged a late fee of $17. Kimberley’s payment schedule is shown, with her balance totalling $42.
 

  1. Find the total amount Kimberley pays for her purchase if repaying in full on 27 July 2024.   (1 mark)
  2. Kimberley’s bank offers short-term loans where simple interest is charged at 18% per annum.
  3. Suppose Kimberley had borrowed $100 from the bank to make this purchase on 1 June 2024 and repaid it in full 8 weeks later.
  4. How much would Kimberley have saved using this approach instead of the buy now, pay later option?   (2 marks)
Show Answers Only

a.    \($117\)

b.    \($14.24\)

Show Worked Solution

a.    \(\text{If total owing paid on 27 July:}\)

\(\text{Total paid} = 25+25+25+42=$117\)
 

b.    \(r=18\%=0.18,\ \ n=\dfrac{8 \times 7}{365} = \dfrac{56}{365}\)

\(I=Prn=100 \times 0.18 \times \dfrac{56}{365} = 2.761… = $2.76 \)

\(\text{Amount saved} = 17-2.76=$14.24\)