Chapter 14, Problem 1ECP

To determine

The Amount financed, total of monthly payments, and total finance charge having $73,900 Purchase price of product, Down payment is $50,000, Number of monthly payments is 60 and Amount of monthly payment is $518.

Answer to Problem 1ECP

The Amount financed is $\underset{\_}{\$23,900}$.

The total of monthly payment is $\underset{\_}{31,080}$.

The total finance charge is $\underset{\_}{7,180}$.

Explanation of Solution

Formula used:

Amount financed is calculated as, $\text{Amount financed}=\text{Cash price}-\text{Down payment}$.

$\text{Total of Monthly payments}=\text{Monthly payment}\times \text{Number of payments of loan}$.

$\text{Total finance charge}=\text{Total of all monthly payments}-\text{Amount financed}$.

Calculation:

Given that, Purchase price of product is $73,900 and down payment is $50,000.

Substitute, $\text{Purchase price of product}=\text{\$73,900 and Down payment}=\text{\$50,000}$ in first formula.

$\begin{array}{c}\text{Amount financed}=\text{Cash price}-\text{Down payment}\\ =73,900-50,000\\ =23,900\end{array}$

Hence, Amount financed is $\underset{\_}{\$23,900}$.

Substitute, $\text{Monthly payment}=\text{\$518 and Number of payments of loan}=\text{60 months}$ in second formula.

$\begin{array}{c}\text{Total of Monthly payment}=\text{Monthly payment}\times \text{Number of payments of loan}\\ =518\times 60\\ =31,080\end{array}$

Hence, Total of Monthly payment is $\underset{\_}{\$31,080}$.

Substitute, $\text{Amount financed}=\$23,900\text{ and Total of all Monthly payment}=\$31,080$ in third formula.

$\begin{array}{c}\text{Total finance charge}=\text{Total of all monthly payments}-\text{Amount financed}\\ =31,080-23,900\\ =7,180\end{array}$

Hence, Total finance charge is $\underset{\_}{\$7,180}$.