Mr. and Mrs Smith have decided to buy new furniture. They have 2 options. The first is to pay cash of $4,200.00, the second is to finance with a 2 year installment loan. They would have to put down 12% with 24 equal payments of $195.00. According to this information, what is the finance charge on the loan ?
Pt = 0.12 * 4200 + 24 * 195,
Pt = 504 + 4680 = 5184.
F.C. = 5184 - 4200 = 984 = Finance Charge.