What is the total finance charge for a $4,250 loan at 13.25% interest compounded monthly for 24 months? a. $25.47 b. $202.55 c. $611.20 d. $4,861.20
Accepted Solution
A:
Answer: Option c. $ 611.20 will be correct.Explanation:Since, the total amount of finance charge is [tex]A=P\frac{r(1+r)^n}{(1+r)^n-1}[/tex]Where P is the principle, r is the rate, n is the times of compound interest (monthly or quarterly etc.) . Here P=$4250 r=13.25%, and n=24.So according to the formula So, the finance charge= [tex]4250\frac{13.25(1+13.25)^{24}}{(1+13.25)^{24}-1}[/tex] = $ 611.20