First we need to calculate the monthly payment to repay the loan using the formula of the present value of an annuity ordinary which is Pv=pmt [(1-(1+r/k)^(-n))÷(r/k)] PV the amount of the loan 4250 PMT monthly payment? R interest rate 0.1325 K compounded monthly 12 N time 24 months Solve the formula for PMT to get PMT=pv÷ [(1-(1+r/k)^(-n))÷(r/k)] PMT=4,250÷((1−(1+0.1325÷12)^(−24))÷(0.1325÷12))=202.55
Now to find the total finance charge use the formula of Total finance charge=monthly payment×number of months-the amount of the loan Total finance charge= 202.55×24−4,250=611.2
