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Which formula is used to work out the repayments on a hire purchase agreement?
AThe compound interest one
BThe exchange rate one
CThe percentage yield one
DThe simple interest one
Answer & Solution
Correct answer: D. The simple interest one
1. A hire purchase agreement lets a customer take goods now and pay over a fixed period.
2. The interest on a hire purchase loan is always charged at a simple interest rate.
3. The principal is the cash price minus any deposit that was paid.
4. The accumulated amount is then divided by the number of months to give the monthly instalment.
_Source: Siyavula Mathematics Grade 10 (Everything Maths, CC BY 4.0), Chapter 9: Finance and growth_