Question

Landon Wallin is an auto mechanic who wishes to start his own business. He will need​ $3800 to purchase tools and equipment. Landon decides to finance the purchase with a 48​-month fixed installment loan with an APR of 5.5​%.

​a) Determine​ Landon's finance charge.

​b) Determine​ Landon's monthly payment.

Answer 1

a)	Finance charge		$     441.95
	Working:
	Present value of annuity of 1	=	(1-(1+i)^-n)/i			Where,
		=	(1-(1+0.004583)^-48)/0.004583			i	5.5%/12	=	0.004583
		=	42.999114			n	48
	Monthly payment	=	Amount borrowed	/	Present value of annuity of 1
		=	$ 3,800.00	/	42.999114
		=	$       88.37
	Finance charge	=	Amount repaid	-	Amount borrowed
		=	(48*$88.37)	-	$ 3,800.00
		=	$     441.95
b)	Monthly payment		$       88.37