Question

Tim worker decided to purchase a new dvd player on an installment loan. the dvd player was $295.00. tim agreed to pay $31.00 per month for 12 months. what is the finance charge in dollars?

Answer 1

Given:
Price of DVD player = 295.00
Terms: 31 per month for 12 months.

31 x 12 = 372 total cost of DVD player

372 - 295 = 77 finance charge

Because Tim was not able to pay for the DVD player outright he had to pay an additional $77 as finance charge. This was a way for the seller to earn more from Tim as Tim enjoys the convenience of paying a minimal amount for a longer period of time.