Question

What is the finance charge on $13,300 financed at 7.9 percent for 4 years if the monthly payment per $100 is $2.44?

Answer 1

If you borrowed $100, then your monthly payment is $2.44

If you borrowed $200, then your monthly payment is 2*2.44 = 4.88

etc etc

We can set up a proportion

2.44/100 = x/13300

to figure out the monthly payment x. Cross multiply and solve for x

2.44*13300 = 100*x

100x = 2.44*13300

100x = 32452

x = 32452/100

x = 324.52

So the monthly payment is $324.52

An alternative way to get this monthly payment is to apply 2.44% to 13300, which is another way to view the phrase  "monthly payment per $100 is 2.44"

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There are 48 months in 4 years (start with 12 mon = 1 yr, then multiply both sides by 4) so we multiply 48 by the monthly payment to get the result 48*324.52 = 15,576.96. This is the total amount you have to pay back which is the principal plus interest.

Subtract off the principal (amount borrowed) to find the interest or finance charge: 15,576.96 - 13,300 = 2,276.96

Answer: Choice B