Answer:
<u>His monthly payment for the loan will be $ 239.28, and the total finance charge for the loan will be $2,356.80.</u>
Step-by-step explanation:
1. Let's review the information given to us to answer the questions correctly:
Principal of the loan = $ 12,000
Interest rate = 7.3% annually = 0.073/12 = 0.00608333 monthly
Time of the loan = 5 years or 60 months
2. His monthly payment for the loan will be $_______, and the total finance charge for the loan will be $ ___________.
Let's use the monthly payment formula this way:
M = P * [r * (1 + r)ⁿ/(1 + r)ⁿ - 1]
Where,
M = monthly payment
P = principal
r = interest rate
n = number of payments
Replacing with the real values, we have:
M = 12,000 * [0.00608333 * (1.00608333)⁶⁰/ (1.00608333)⁶⁰- 1]
M = 12,000 * (0.008753441
/0.438922)
M = 12,000 * 0.01994
<u>M = $ 239.28</u>
Now, we can calculate the total finance charge for the loan, this way:
Total finance charge = (Monthly payment * Number of payments) - Principal of the loan
Total finance charge = (239.28 * 60) - 12,000
Total finance charge = 14,356.80 - 12,000
<u>Total finance charge = $ 2,356.80</u>
