Question

Suppose that you took out a loan with a principal of $24,680. To pay off the principal and the interest, you made quarterly payments of $1,382 for six years. Furthermore, you paid a service charge of $396. What was your total finance charge?
a.
$396
b.
$8,488
c.
$8,884
d.
$8,292

Answer 1

Total paid in quarterly payments = 1,382 × (6 years × 4 quarters) = 1,382 × 24 = 33,168.

Add service charge: 33,168 + 396 = 33,564 total paid.

Finance charge = total paid − principal = 33,564 − 24,680 = 8,884.

Answer: c. $8,884