6.1 Introduction to Lending

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• Math Help

How was the finance charge calculated in Example 4? First, the monthly payment, \$65.08, was calculated (see Section 6.2). The monthly payment M for an installment loan with a principal of P taken out for n months at an annual percentage rate of r (in decimal form) is

Using P = \$1438.95, r = 8% = 0.08, and n = 24, the monthly payment is

Next, the monthly payment and the number of payments were used to find the total amount due.

Then the amount financed was subtracted from the total amount due to determine the finance charge.

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• Checkpoint Solution

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