Question

Rodrigo applied for a $14,000 loan at an interest rate of 5.4% for 6 years. Use the monthly payment formula to complete the statement. M = M = monthly payment P = principal r = interest rate t = number of years Rodrigo’s monthly payment for the loan is , and the total finance charge for the loan is

a. 19 %




b. 20 %




c.21 %




d. 24 %

Answer 1

$2421.76

Explanation:

The monthly payment formula goes thus :

M = P * r(1+r)^n / ((1+r)^n - 1)]

r = 5.4% ; n = 6

We could accurately obtain the monthly payment using a monthly payment calculator

The monthly payment M, obtained = $228.08

Therefore.$228.08 will be repaid monthly (this amount includes the interest paid on the amount borrowed).

The finance charge :

Total amount repaid = monthly payment * number of period

Total amount repaid = $228.08 * (12 * 6) = 16421.76

Finance charge = total. Amount repaid - principal

Finance charge = 16421.76 - 14000

= $2421.76