Interest can be added to an amount of money when it is saved or borrowed. Credit agreements have an amount of interest built in.
Part ofApplications of MathsManaging finance
The following example shows you how to calculate instalments:
The cash price of a bike is \(\pounds220\). The credit agreement price is \(\pounds300\).
If the deposit is \(10\%\) followed by ten equal monthly instalments, find the amount you pay each month.
First calculate the deposit:
Deposit \(= 10\%\) of \(\pounds220\)
\(= \pounds22\)
Total still to be paid by instalments = credit agreement price - deposit
\(= 300 - 22\)
\(= \pounds278\)
As there are to be 10 equal instalments we divide this by 10.
Each instalment \(= \frac{{278}}{{10}}\)\(= \pounds27.80\)
