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31 May, 23:09

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.

a.

5.48%

b.

8.43%

c.

18.55%

d.

15.65%

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Answers (1)
  1. 31 May, 23:16
    0
    We are given with

    P = $15,360

    n = 8 years or 16 semi-annuals

    r = 9.58% compounded semiannually

    S = 1294.64

    The future amount of the loan is

    F = P (1 + i) ^n

    i should be the effective interest rate of r

    n should be the number of payments

    F = 15360 (1 + 9.58/2) ^16

    Solve for F and divide by the service charge to the answer
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