Question

Installment Loans

Ken wants to purchase a boat. The purchase price of the boat is $15, 000. The dealership will allow him
to pay cash or finance the boat for a down payment of $3,000 and 48 monthly payments of $300. Ken
chose to finance the boat.
Answer the following questions.
a) What is the amount financed?
b) What is the total amount of monthly payments?
c) What is the amount of the finance charge?

Answer 1

a) The amount financed is the purchase price minus the down payment, which is:

$15,000 - $3,000 = $12,000

Therefore, the amount financed is $12,000.

b) The total amount of monthly payments is the monthly payment multiplied by the number of payments, which is:

$300 x 48 = $14,400

Therefore, the total amount of monthly payments is $14,400.

c) The finance charge is the total amount of payments minus the amount financed, which is:

$14,400 - $12,000 = $2,400

Therefore, the amount of the finance charge is $2,400.