SOLUTION: Tamora just made the last of her monthly payments on her loan. She had been making these payments for the past nine years. The loan had a principal of $10,675 and an interest rate

Question 890002: Tamora just made the last of her monthly payments on her loan. She had been making these payments for the past nine years. The loan had a principal of $10,675 and an interest rate of 4.75%, compounded monthly. In addition, Tamora paid $939.25 in service charges. What was Tamora�s total finance charge? Round all dollar values to the nearest cent.

Answer by Theo(13342) (Show Source): You can put this solution on YOUR website!
principal was 10,675
interest rate was 4.75% per year compounded annually.
additional $939.25 was paid in service charges.
payment on the principal plus interest is shown below:

pv = 10675
i = .0475/12 = .0039583333... per month.
n = 9 * 12 = 108 months.
fv = 0
pmt = 121.6635... per month
this payment includes charges for the principal plus the interest.
the service charge is on top of that.
total finance charge would be 108 * 121.6635... + 939.25 - 10675.
that should be equal to 13139.66 + 939.25 - 10675 = 3403.91

i used a financial calculator to calculate the monthly payment.
if you need to do it by hand, just remember that the interest rate per time period is the annual interest rate divided by the number of compounding periods per year, and the number of time periods is the number of years times the number of compounding periods per year.
the formula for payment of an annuity can be found at the following link.
http://www.financeformulas.net/Annuity_Payment_Formula.html

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