Emma Weber purchased a bedroom set with an installment loan that has an APR of 12%. The bedroom set sells for $2,650. The store financing requires a 15% down payment and 42 monthly payments. What is the finance charge?
The finance charge is the amount that Emma will pay in order to cover the processing costs of the bedroom set. In this case it would be $520.28. You have first find the down payment cost ($384) and then find how much she needs to pay each month to cover the rest of the cost ($66.34) and multiply it by the 42 months to get $2786.28. Add the down payment onto that and subtract the original cost and you will get your finance charge of $520.28. Hope this helps!
