Your local T-Spirit store is having a sale on the latest i-razpod cell phone. The store is also offering financing to those who qualify. The new cell phone is on sale for $150.00 with a two year contract. The sales associate informs you that the closed-end installment loan offered by the store is a 24 month installment plan with monthly payments of $8.44. Determine the finance charge (interest) of the installment loan.
Multiply the monthly payment by 24 months: $8.44 × 24 = $202.56 in total payments. Subtract the phone’s $150.00 sale price: $202.56 − $150.00 = $52.56. The finance charge is $52.56, choice B.
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