Question

Colin took out a loan with a principal of $32,800. After five years, the interest and principal totaled $48,872. If Colin made monthly payments of $816 for five years until the loan was paid off, how much did Colin pay in service charges?
a.
$16,072
b.
$88
c.
$16,160
d.
$163


Please select the best answer from the choices provided

A
B
C
D

Answer 1

To find out how much Colin paid in service charges, we first need to calculate the total amount he paid in monthly payments over the five years.

1. **Calculate the total number of payments**:
Since Colin made monthly payments for five years:
\[
5 \text{ years} \times 12 \text{ months/year} = 60 \text{ months}
\]

2. **Calculate the total amount paid in monthly payments**:
Colin made monthly payments of $816:
\[
60 \text{ months} \times 816 \text{ dollars/month} = 48,960 \text{ dollars}
\]

3. **Determine the total amount paid**:
The total amount paid includes both the principal and the interest:
- Total payment calculated from monthly payments: $48,960
- Total amount (Principal + Interest): $48,872

4. **Calculate the service charges**:
The service charges would be the difference between the total amount paid through monthly payments and the total amount due (principal + interest):
\[
\text{Service Charges} = \text{Total Payment} - \text{Total Amount}
\]
\[
\text{Service Charges} = 48,960 - 48,872 = 88 \text{ dollars}
\]

Therefore, the amount Colin paid in service charges is **$88**.

The correct answer is **B**.