Question

Bob has taken out a loan of $15,000 for a term of 48 months (4 years) at an interest rate of 6.5%. Using the amortization table provided, what will be his total finance
charge over the course of his loan?
Monthly Payment per $1,000 of Principal
Rate 1 Year 2 Years 3 Years 4 Years 5 Years
6.5% $86.30 $44.55 $30.65 $23.71 $19.57
7.0% $86.53 $44.77
$30.88
$23.95
$19.80
7.5% $86.76 $45.00
$31.11
$24.18
$20.04
8.0% $86.99 $45.23
$31.34
$24.41
$20.28
8.5% $87.22 $45.46
$24.65
$24.65
$20.52
9.0% $87.45 $45.68
$31.80
$24.89
$20.76
A.
$355.65
O
B.
$975.00
C.
$1,682.40
D.
$2,071.20
E. $17,071.20
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Answer 1

Answer:

  D.  $2071.20

Step-by-step explanation:

The table tells you that Bob's monthly payment on a 4-year loan at 6.5% will be $23.71 per thousand borrowed. The sum of those 48 payments is ...

  48 × $23.71 = $1138.08

That means, Bob pays $138.08 in total finance charge for each $1000 he borrows. He is borrowing 15 times $1000, so his total finance charge will be ...

  finance charge = 15 × $138.08 = $2071.20 . . . matches choice D