Question

Jesse candelaria borrows $2000 at a 10 percent add-on rate for three years. What is the finance charge?

Answer 1

$200 im pretty sure, maybe im wrong :/ ?

Answer 2

$600

Step-by-step explanation:

The add-on rate on loan is the total percentage of interest charged on a loan for the whole tenor of the loan. This rate is calculated by multiplying the annual rate of the interest by the tenor of the loan.

And finance charge is the amount incurred on financing facility taken which is normally calculated as a percentage of the principal.

In the case of Jesse Candelaria, the finance charge will be calculated using the add-on rate.

Add-on rate = 10% multiplied 3 (loan tenor)

Add-on rate = 30%.

So the 30% is the interest to be paid on the loan for the whole tenor.

So finance charge = 30% of $2,000

Finance charge= $600.