This post will explore what the total finance charge for a $4250 loan at 13.25% interest compounded monthly for 24 months.
To calculate the total finance charge for a loan, we need to determine the interest accrued over the loan term. In this case, let’s calculate the total finance charge for a $4,250 loan at an interest rate of 13.25% compounded monthly for 24 months.
First, let’s calculate the monthly interest rate:
Monthly interest rate = Annual interest rate / 12 = 13.25% / 12 = 0.01104167
Next, let’s calculate the total number of compounding periods:
Number of compounding periods = Loan term in years x Number of compounding periods per year = 2 years x 12 = 24
Now, we can calculate the total finance charge using the formula for compound interest:
Total finance charge = Principal x (1 + Monthly interest rate)^Number of compounding periods – Principal
Total finance charge = $4,250 x (1 + 0.01104167)^24 – $4,250
Total finance charge ≈ $4,250 x (1.01104167)^24 – $4,250 ≈ $4,250 x 1.29912624 – $4,250 ≈ $5,518.96 – $4,250 ≈ $1,268.96
Therefore, the total finance charge for a $4,250 loan at 13.25% interest compounded monthly for 24 months would be approximately $1,268.96.
