1. **Problem statement:** We have an installment contract with monthly payments of 341.82 for 2 years. The interest rate is 11% per annum compounded monthly. We want to find: (a) The amount financed (present value of all payments). (b) The total interest cost. 2. **Formula and explanation:** The amount financed is the present value of an annuity with monthly payments. The formula for the present value $PV$ of an annuity with payment $P$, interest rate per period $i$, and number of payments $n$ is: $$ PV = P \times \frac{1 - (1+i)^{-n}}{i} $$ where: - $P = 341.82$ - Annual interest rate = 11%, so monthly interest rate $i = \frac{0.11}{12} = 0.009166667$ - Number of payments $n = 2 \times 12 = 24$ 3. **Calculate the amount financed:** Calculate $1+i = 1 + 0.009166667 = 1.009166667$ Calculate $(1+i)^{-n} = (1.009166667)^{-24}$ Using a calculator: $(1.009166667)^{24} \approx 1.244974$, so $(1.009166667)^{-24} = \frac{1}{1.244974} \approx 0.8033$ Now compute the numerator: $$1 - 0.8033 = 0.1967$$ Divide by $i$: $$\frac{0.1967}{0.009166667} \approx 21.46$$ Multiply by $P$: $$341.82 \times 21.46 = 7333.99$$ So, the amount financed is approximately **7333.99**. 4. **Calculate the interest cost:** Total payments made: $$341.82 \times 24 = 8203.68$$ Interest cost = Total payments - Amount financed: $$8203.68 - 7333.99 = 869.69$$ **Final answers:** (a) Amount financed = 7333.99 (b) Interest cost = 869.69