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What is actual finance charge for the first three months

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Reference no: EM131310477

Peg Gasperoni bought a $50,000 life insurance policy for $100 per year. Ryan Life Insurance Company sent her the following billing instructions along with a premium plan example:

"Your insurance premium notice will be mailed to you in a few days. You may pay the entire premium in full without a finance charge or you may pay the premium in installments after a down payment and the balance in monthly installments of $30. The finance charge will be added to the unpaid balance. The finance charge is based on an annual percentage rate of 15%."

If the total
policy premium is:		 And you put down: The balance subject to finance charge will be: The total number of monthly installments
($30 minimum)
will be:		 The monthly installment before adding the finance charge will be: The total finance charge for all installments
will be:		 And the total deferred payment price will be:
$100 $30.00 $ 70.00 3 $30.00 $1.75 $101.75
$200 $50.00 $150.00 5 $30.00 $5.67 $205.67
$300 $75.00 $225.00 8 $30.00 $12.84 $312.84

Peg feels that the finance charge of $1.75 is in error.

a. What is the actual finance charge for the first three months? (Round your answer to the nearest cent.)

b. Is she correct?

Reference no: EM131310477

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