38
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Question 38 • FowU - Financial Math - B

Esteban bought a new stove for $986 on his credit card. He used the stove for eleven years before replacing it. The stove cost him an average of $0.14 per day in electricity. Esteban had preventive maintenance done on the stove, costing $24.25 each year for the eleven years. Esteban’s credit card has an APR of 9.26%, compounded monthly. He paid off his balance by making identical monthly payments for five years. Sales tax in Esteban’s area is 8.22%. Assuming that Esteban made no other purchases or payments with his credit card, what was the lifetime total cost of the stove? (Assume that two of the years Esteban had the stove were leap years, and round all dollar values to the nearest cent.)

Answer
A
$2,534.57
B
$2,166.53
C
$2,234.23
D
$2,064.53

Explanation

First include sales tax: $986 × 1.0822 = $1,067.05. At 9.26% APR compounded monthly, the monthly rate is 0.0926 ÷ 12, and the 60-payment loan calculation gives a monthly payment of about $22.29; 60 payments total $1,337.40. The stove used 11 × 365 + 2 = 4,017 days, so electricity cost $4,017 × $0.14 = $562.38, and maintenance cost 11 × $24.25 = $266.75. Adding these costs gives $1,337.40 + $562.38 + $266.75 = $2,166.53, choice B.

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