Question

antoni gaudi purchase a bedroom set with an installment loan that has an APR of 12%. The bedrooms that sells for $2650. The store financing requires a 15% down payment and 42 monthly payments. What is the finance charge?

Answer 1

Total Finance cost $ 517

Explanation:

Down payment paid = 15 % of $ 2650

= (15 / 100 ) * 2650

= $ 397.5

Amount left to be paid = $2650 - $ 397.5

= $ 2252.5

Since antoni gaudi purchase with an installment loan that has an APR of 12%

Monthly payment =
`Loan * r / 12 * ( 1 + r/12) ^ n /( ( 1+ r/12) ^ n^- ^1)`

r = 12 % = 0.12

n = 42

Putting values we get,

Monthly Payment =
`2252.5 * 0.12 / 12 * ( 1+ 0.12 / 12) ^ 4 ^2 / (( 1+ 0.12 / 12) ^ 4 ^2 ^-^1))`

Monthly payment = 65.94

Since payments are for 42 months so,

Total payments = 42 * 65.94

= $ 2769.48

Total Finance cost = Total payments - Amount left to be paid

= 2769.48 - 2252.5

= 516.98

=~ $ 517