Everything Maths Grade 10

VISIT:

This video explains hire purchase and shows some examples of hire purchase calculations.

See video:2GHFatwww.everythingmaths.co.za

Worked example 7: Hire purchase

QUESTION

Troy wants to buy an additional screen for his computer which he saw advertised for R 2500 on the internet.

There is an option of paying a 10% deposit and then making 24 monthly payments using a hire purchase

agreement, where interest is calculated at 7,5% p.a. simple interest. Calculate what Troy’s monthly payments

will be.

SOLUTION

Step 1: Write down the known variables

A new opening balance is required, as the 10% deposit is paid in cash.

10 %of 2500= 250

)P= 2500 250 = 2250

i=0,075

n=

24

12

= 2

Step 2: Write down the formula

A=P(1 +in)

Step 3: Substitute the values

A= 2250 (1 +0,0752)

=2587,50

Step 4: Calculate the monthly repayments on the hire purchase agreement

Monthly payment =

2587,50

24

=107,81

Step 5: Write the final answer

Troy’s monthly payment is R 107,81.

A shop can also add a monthly insurance premium to the monthly instalments. This insurance premium will be
an amount of money paid monthly and gives the customer more time between a missed payment and possible
repossession of the product.

Chapter 9. Finance and growth 341