Question

32. You plan to purchase items for $4000 and will finance the cost with a fixed installment

loan. The seller tells you that you will have to pay $100 per month for 48 months.
a. What is the finance charge?
b. What is the interest rate? (Round to the nearest hundredth)

Answer 1

Amount of finance charge = $800

Interest rate = 5% per year

Explanation:

Given:

Cost of item = $4,000

Per month payment = $100

Number of month = 48 month = 48 /12 = 4 year

Find:

Amount of finance charge

Interest rate

Computtaion:

Total amount pay = 100 x 48

Total amount pay = $4,800

Amount of finance charge = Total amount pay - Cost of item

Amount of finance charge = 4,800 - 4,000

Amount of finance charge = $800

Interest = P x r x T

800 = 4,000 x r x 4

800 = 16,000 x r

Interest rate = 5% per year