To calculate the finance charge we need to apply the simple interest formula, which can be seen below:
Where "M" is the interest value, "C" is the value on which the interest should be calculated, "r" is the interest rate and "t" is the elapsed time in years. Pam paid $50 in advance, therefore the interest should be calculated on the $700 there is left to be paid. We have:
The finance charged 252 in interest.