Question

Sam is paying off his eight-year, $15,360 loan in semiannual installments. The loan has an interest rate of 9. 58%, compounded semiannually, and a service charge of $1,294. 64. Once the loan has been fully paid off, what percentage of the total finance charge will the service charge be? round all dollar values to the nearest cent.

Answer 1

The correct answer Percentage of service charge to total finance charge will be 15.68%.

Total finance charge

Given,

Sam is paying a $15,360 loan in semi-annual installments,

Amount A = $15,360

interest rate r = 9.58%

Compounded semi-annually

then rate will be = 9.58%/2 = 4.79%

number of periods, n =

Taking P as periodic payment,

The total amount paid by Sam in 16 periods =

Interest =

Given that service charge is = $1,294.64

Total finance charge = Total amount paid + service charge

Percentage of service charge to total finance charge will be =

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