Question

TIME EARNED1/160Pam purchased a new laptop, which was advertised for $750. She bought it onthe installment plan by paying $50 at the time of purchase and agreeing to paythe balance plus 18% simple interest on the balance in 24 monthly payments.How much is the finance charge?$250.20$25.20

Answer 1

To calculate the finance charge we need to apply the simple interest formula, which can be seen below:

$M\text{ = C}\cdot r\cdot t$

Where "M" is the interest value, "C" is the value on which the interest should be calculated, "r" is the interest rate and "t" is the elapsed time in years. Pam paid $50 in advance, therefore the interest should be calculated on the $700 there is left to be paid. We have:

$M\text{ = 700}\cdot\frac{18}{100}\cdot\frac{24}{12}\text{ = 700}\cdot0.18\cdot2\text{ = }252$

The finance charged 252 in interest.