75.3k views
2 votes
What is the total finance charge for a $4,250 loan at 13.25% interest compounded monthly for 24 months? ( I hate asking for help, but I am very bad at math... Could someone possibly help me figure it out? By going through the steps)

a.
$25.47
b.
$202.55
c.
$611.20
d.
$4,861.20

2 Answers

4 votes

the correct answer is c


User Dominik Grabiec
by
8.2k points
1 vote
There is a formula for a loan : A = P * r * ( r + 1 ) ^n / (( r + 1 ) ^n - 1 ), where P is the loan and A is the monthly payment. So P = $4,250 and r = 0.1325 : 12 = 0.011. ( 13.25 % = 0.1325 and we divide it by 12, because the interest is compounded monthly ). A = 4,250 * 0.011 * 1.011^(24) / ( 1.011^(24) - 1 ) = 4,250 * 0.11 * 1.3 / 0.3 = 4,250 * 0.0477; A = $202.55. Finally we have to multiply this sum by 24 : the total finance charge: $202.55 * 24 = $ 4,861.20. Answer: D ) $4,861.20
User Prashanth Benny
by
8.4k points

No related questions found

Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories