Alice Dubois was charged $455 in finance charges on a loan for 15 months. Find the finance charge refund if she pays off the loan in full after 10 payments.
I will assume this is "simple interest"
let the rate be r, let the principal be p
so (15/12)(rp) = 455
rp = 364
for only 10 months
interest = (10/12)(rp)
refund = 455 - (10/12)(rp)
= 455 - (5/6)(364)
= $151.67
To find the finance charge refund, we need to first determine the monthly finance charge.
Given that Alice was charged $455 in finance charges over 15 months, we can divide the total finance charge by the number of months to find the monthly finance charge:
$455 / 15 months = $30.33 per month
This means that she is charged a finance charge of $30.33 each month.
Since she pays off the loan in full after 10 payments, we can calculate the total finance charges she would have paid if she made all 15 payments:
$30.33 x 15 months = $454.95
Therefore, Alice's total finance charge refund would be the difference between the total charges and the charges she paid:
$455 - $454.95 = $0.05
Hence, Alice's finance charge refund would be $0.05.