Donald is finally bowing to pressure from his friend Greta and has decided to retrofit his house
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Question:
Donald is finally bowing to pressure from his friend Greta and has decided to retrofit his house to make it entirely reliant on renewable energy. The total cost of the equipment and works is £6,000. However, he doesn’t actually have the money to pay the full amount upfront so is looking at two different financing options.
- Option A is the credit deal offered by the retailer. Donald can pay in monthly installments of £220, spreading the cost over 36 months.
- Option B is to buy it partly on his credit card which has an APR of 25.2%. Donald has no outstanding credit on the card at present, but he’ll have to use up his whole credit limit. Even then, he will need to find £3,500 from elsewhere, which he can just about scrape together, but it will wipe out his savings. He would then aim to pay off the credit card by paying £70 per month.
Fill in Table 3 using the Borrowing and saving calculator to calculate the missing figures and show your workings.
Table 3 Total interest options
| Monthly payment (£) | Repayment period (months) | Total interest (£) | APR | |
| Option A | 220 | 36 | ||
| Option B | 70 | 25.2% |
Expert Answer:
Solution Table Monthly Payment Repayment Period Total Interest APR Option A 220 36 7920 106... View the full answer
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