Question

$35,125 loan, a feat which took ten years of quarterly payments. The loan had an interest rate of 7.44%, compounded quarterly. If you also paid $5,180.70 in service charges, what percentage of the total cost was made up by your finance charges?

Answer 1

First find the amount of each payment:

`35,125 = P(((1+i)^(40) -1)/(i (1+i)^(40))) , i = (.0744)/(4) \\ \\ P = 1252.70`

The total cost will be 40 payments plus service charges.

`40*1252.70 + 5180.70 = 55,288.90`

The percentage is the service charge divided by total cost:

`X = (5180.70)/( 55,288.90) = .0937 = 9.37\%`