Question

Sarah is taking out a $24,400, four-year new-car loan with an APRof 6.88%. What is the finance charge for this loan? Round to the nearest hundred dollars.

Answer 1

The product of the APR, the loan amount and the duration gives the

finance charge as $6715.

Response:

• The finance charge is approximately $6715

What is the finance charge of a loan?

Finance charge:

The amount the lender of the loan takes as compensation is known as the finance charge

Given:

The loan amount (principal) = $24,400

The duration of the loan (time) = 4 years

The Annual Percentage Rate, APR (rate) = 6.88%

Required:

The finance charge on the loan.

Solution:

Finance charge = Principal × Rate × Time

Therefore;

• Finance charge = $24,400 × 0.0688 × 4 = $6714.88 ≈ $6715

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