Adriana wishes to take out an installment loan to finance the purchase of a sailplane costing $51,600. Her loan requires a 30% down payment and equal monthly payments of $1,557.25 for 42 months. What is the amount of the finance charge on this loan?

Question

Quizplus · Accepted Answer

The finance charge is the total amount of interest and fees Adriana pays over the life of the loan, excluding the principal. First, calculate the down payment: 30% of $51,600 = $15,480. The amount financed is then $51,600 - $15,480 = $36,120. Over 42 months, Adriana pays a total of 42 * $1,557.25 = $65,404.50. Subtracting the amount financed from the total payments gives the finance charge: $65,404.50 - $36,120 = $29,284.50.

Adriana Wishes to Take Out an Installment Loan to Finance