1. **Problem Statement:** We have an installment contract requiring monthly payments of 341.82 for 2 years with an interest rate of 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 (PV) of an annuity since payments are equal and made monthly. The formula for the present value of an annuity is: $$PV = P \times \frac{1 - (1 + i)^{-n}}{i}$$ where: - $P$ = payment per period = 341.82 - $i$ = monthly interest rate = annual rate / 12 = $\frac{0.11}{12} = 0.009167$ - $n$ = total number of payments = 2 years $\times$ 12 months/year = 24 3. **Calculate the present value:** Calculate $1 + i$: $$1 + 0.009167 = 1.009167$$ Calculate $(1 + i)^{-n}$: $$1.009167^{-24} = \frac{1}{1.009167^{24}}$$ Calculate $1.009167^{24}$: $$1.009167^{24} \approx 1.244974$$ So, $$(1 + i)^{-n} = \frac{1}{1.244974} \approx 0.8033$$ Calculate numerator: $$1 - 0.8033 = 0.1967$$ Calculate denominator: $$i = 0.009167$$ Calculate fraction: $$\frac{0.1967}{0.009167} \approx 21.45$$ Calculate present value: $$PV = 341.82 \times 21.45 = 7329.99$$ 4. **Interpretation:** The amount financed is approximately 7329.99. 5. **Calculate interest cost:** Total payments made: $$341.82 \times 24 = 8203.68$$ Interest cost = Total payments - Amount financed: $$8203.68 - 7329.99 = 873.69$$ **Final answers:** (a) Amount financed = 7329.99 (b) Interest cost = 873.69