Question

Paul has an eight-year loan with a principal of $26,900. The loan has an interest rate of 8. 18%, compounded quarterly. If Paul pays $1,527 in service charges and makes quarterly payments on his loan, what will his total finance charge be when the loan is repaid? Round all dollar values to the nearest cent. A. $10,588. 28 b. $11,546. 36 c. $11,370. 04 d. $1,527. 0.

Answer 1

The total finance charge would be $11,546. 36 when the loan is repaid.

Computation:

The rate of interest is 8.18 percent, or 0.0818 percent compounded quarterly (4), which determines the value if I am interested in:

$= \frac{0.0818}{4}$

$=0.02045$

The number of years, or n, is now calculated as follows:

$8 \text{ x } 4 = 32$

The number 8 represents the time of year, while the number 4 represents the quarterly interest payment.

The discounting factor is determined as follows:

$D = \frac{1 - (1+i)x^{-n} }{i} \\\\D = \frac{1 - (1+0.02045)x^{-32} }{0.02045} \\\\D = 23.31$

Now we'll figure out how much we'll have to pay each quarter by using the following formula:

$= \frac{26,900}{23.31} \\\\= 1153.76$

The payment made every quarter for the next eight years would be:

$= 1153.76 \text{ x } 32\\\\= 36920.32$

As a result, we can calculate the total amount of interest paid as follows:

$= 36,921.32 - 26,900\\\\= 10,021.32$

$= 10,021.32 + 1,527\\\\= 11,548.32$

As a result, the financing charge is calculated by adding the total interest and service charge, that is, to convert the financial charge amount into cents, multiply the charge amount by 100, which yields a loan payment of 1,154,832 cents.

To know more information about financial charge computation, click here:

https://brainly.com/question/3057353