Future Business Leaders of America (FBLA) Business Calculations Practice Test

A TV is priced at $1000. If purchased with 12 monthly payments at 6% simple interest, what will the total cost be?

1. $1000

2. $1060

3. $1006

4. $1072

The correct answer is: $1060

To determine the total cost of purchasing the TV priced at $1000 with 12 monthly payments and a simple interest rate of 6%, it is necessary to calculate the interest incurred over the duration of the payments. Simple interest is calculated with the formula: \[ \text{Interest} = \text{Principal} \times \text{Rate} \times \text{Time} \] In this scenario: - The principal is $1000 (the price of the TV). - The rate is 6%, which can be expressed as 0.06 in decimal form. - The time is 12 months, which we convert to years for our formula. Since 12 months is equal to 1 year, we use 1 for time. Now, we can substitute the values into the formula: \[ \text{Interest} = 1000 \times 0.06 \times 1 = 60 \] This means that the interest amount to be paid over the course of the year is $60. To find the total cost of the TV including interest, we add the original price to the total interest: \[ \text{Total Cost} = \text{Principal} + \text{Interest} = 100