Question

Disable audio adjust font size if Anna buys a car for $18,000 with a down payment of $2,000 and is given a 3-year loan with an APR of 5 percent and monthly payments of $480, what is the dollar amount of the finance charge on this loan?

Answer 1

The finance charge on this loan is -$720, which means Anna saves $720 compared to the amount borrowed.

Step-by-step explanation:

To find the dollar amount of the finance charge on this loan, we need to calculate the total amount paid over the 3-year loan period and subtract the principal amount borrowed.

Step 1: Calculate the total amount paid over 3 years:

Monthly payment x Number of months = Total amount paid

$480 x 36 = $17,280

Step 2: Subtract the principal amount borrowed from the total amount paid:

Total amount paid - Principal amount = Finance charge

$17,280 - $18,000 = -$720

The finance charge on this loan is -$720, which means Anna saves $720 compared to the amount borrowed.