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Answer:
a. Loan Q’s finance charge will be $83.73 greater than Loan P’s.
Step-by-step explanation:
To solve this, we will use the formula for loan payment:
Here,
P is the payment ; PV is the present debt; r is the interest rate; n is the number of payments per year; t is the time
Working for bank P:
PV = 19450
r = 5.8 or 0.058
t = 9
n = 12
Putting the values in the formula we get:
Solving this we get:
P= $231.59
Dahlia's monthly payment is $231.59. So,her total payment for 9 years will be =
Finance charge will be = total future value minus loan amount plus service charge.
= = $6486.72
Hence, the total finance charge of bank P is $6,486.72
Working for bank Q:
PV = 19450
r = 5.5 or 0.055
t = 10
n = 12
Putting the values in the formula we get:
Solving this we get:
P= $211.08
Dahlia's monthly payment is $231.59. So,her total payment for 10 years will be =
Finance charge will be =
Hence, the total finance charge of bank Q is $6570.45
Now we will find the difference between both bank's finance charges:
dollars
So, we can say that Loan Q’s finance charge will be $83.73 greater than Loan P’s.