Question

Rachel took out a personal loan for $4,500 with a monthly payment of $173. 06 for 36 months. Determine the finance charge on Rachel's loan if she takes all 36 months to pay it off. A. $48. 06 b. $1,730. 16 c. $4,500. 00 d. $6,230. 16.

Answer 1

The correct statement is that Rachel's finance charge on the loan of $4500 will be $6230.16 for the 36 months paying $173.06 each month. The correct statement is D.

The total finance charge can be calculated by doing the multiplication of the monthly payment to be done by the number of months to be taken for such repayment.

• Finance charge is referred to as the cost borne by a person for availing the finance facility by paying a premium amount over such principal amount also known as interest.

• The calculation of finance charge can be calculated by using the formula as below,

• $\rm Finance\ Charge= (Monthly\ Payment\ x\ Months) - Principal\ Amount$

• Now we put the given values in the formula given above,

• $\rm Finance\ Charge = (\ 173.06\ x\ 36) - \ 4500\\\\\\\rm Finance\ Charge =\ 6230.16- \ 4500\\\\\\ \rm Finance\ Charge= 1730.16$

• So it has been obtained that the finance charge is $6230.16

Hence, the correct option is D that the Finance charge borne by Rachel over the loan of $4500 and a period of 36 months with a monthly payment of $173.06 is $6230.16.

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