HERE PURCHASEAGREEMENTS

nrc us\mil›’ sltnrt Icrn Ioanr that are u5eN t0 pUPChase

tclc•’isi‹›ns, coittpi›ters nncl nthcr household goods.
›vith sin t›lc interest anlt in most Cases require a cash
t)Itn pq{g +tff gvcr q period of time with interest.

use a re men t. The

;gI-ccIiIcnt stntcs that IO"/» tlcFnsit i^ rcquirccl and the balance iS to be
pnid nff nt nn interest rate of 6,5’/• P•8• simple interest on the full amount
nf the loan a› cr 3 'cars. Dcterininc•
n) 1 he amount that must he paid g$ a cash deposit.
b) The remaining amount that lllUSt be taken as a {O8fl.
c) The equal monthly payments that must be made over 3 years.
d) The actual amount that Jarrod pays for the couch.

10 lq
a) Cash deposit= 6000 x ol ‹.00s›
100
= R600

b) Loan amount = 6000 — 600 —+ selling priCc — deposit

= R5400

c) Before calculating the monthly payments you have to calculate the value of the loan
after 3 years. Note that you do not pay interest on the cash deposit:
Step 1: Calculate the interest on the loan:
8, 5
5400 x = R459 interest for onc year
100
Step 2: Calculate the total interest on the loan for 3 years:
Total interest = 459 x 3 —› the loan is for 3 years
= Rl 377 —› total interest on the loan
Step 3: Add the initial amount to the total interest
Total owed at the end of 6 years = 5 400 -+-1377 initial loan + interest
= R6777
Step 4: Calculate the monthly repayments:
Number of months = 3 x12 = 36 there arc 36 months in 3 years
Monthly repayments = 6777 = 36 —r total loan + numbcr of
months
— R l 88,25 per month

d) The actual amount paid for the couch is the total amount of the loan with interest,
plus the initial cash deposit:
Total Paid = fi 777 + G00 lo.ui ‹iintitint + cash deposit
= R7 377

Complete Exercise 13 on page 227

HIRE PURCHASE AGREEMENTS
that arc uscd to purchatt
ki‹cI en npylinnccs, fiIy\zitui-c, t•Ic›'isions, compu ters anü othcr household gends.
Hii c t› irch•sc agreeiiients deal With simple interest and in most cases require a cash
deposit to bc paid. The reniaindcr is then paid off over a period of time with interest.

Example: Jarrod buys a couch for R6 000 on a hire purchase agreement. The
agreement states that 10"% deposit is required and the balance is to b
paid off at an interest rate of 8,5% p.a. simple interest on the full antoupt
of the loan over 3 years. Determine:
a) The amount that must be paid as a cash deposit.
b) The remaining amount that must be taken as a loan.
c) The equal monthly payments that must be made over 3 years.
d) The actual amount that Jarrod pays for the couch.

10
a) Cash deposit= 6000 x
100 10% of 6 000
= R600

b) Loan amount = 6000 — 600 -+ selling price — deposit

= R5 400

*) Before calculating the monthly payments you have to calculate the value of the loan
after 3 years. Note that you do not pay interest on the cash deposit:
Step 1: Calculate the interest on the loan:
8,5
5400 • R459 - interest for one year
r
100
Step 2: Calculate the total interest on the loan for 3 years:
Total interest = 459 x 3 the loan is for 3 years
- Rl377 total interest on the loan
Step 3: Add the initial amount to the total interest
Total owed at the end of 6 years = 5 400 + 1377 initial loan +
interest
— R6777
Step 4: Calculate the monthly repayments:
Number
Monthly repayments — C 777 - 3‹i —› ruth lOal = nurnber
o i‘ iiionths
= R 188,25 per iiioqtt,
d) The actual amount paid for
the couch is the total amount of the loan 1› ith inter¢x!.
plus the initial CaSh deposit:

— 117 377