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The amount of finance charges for the loan amount of $6,500 is $<em><u>17.15</u></em>
The finance charge is the extra amount for holding the loan amount until the maturity period. It is mostly the interest amount paid on the entire loan amount.
Computation:
Given,
Principal Amount =$6,500
Interest rate =9.5%
Period of compounding =36 months
First, the annuity formula will be used to determine the entire future value:
Now, the finance charge will be determined by the difference between the Annuity amount and Principal amount.
Therefore, the finance charge is $17.15 is not mentioned in any of the given options.
To know more about finance charges, refer to the link:
Answer:
(a) annual compounding = 5.063 %
(b) monthly compounding = 4.949 %
(c) continuous compounding = 4.939 %
Explanation:
given data
interest rate = 5 % = 0.05
solution
we get here equivalent rate for annual compounding
equivalent rate is express as
= 1 + r
r = 1.025² - 1
r = 5.063 %
and
now we get equivalent rate for monthly compounding that is
=
solve it we get
r = 4.949 %
and
now we get equivalent rate for continuous compounding
=
solve it we get
r = 4.939 %