Question

Peg Gasperoni bought a $50,000 life insurance policy for $190 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 $50. The finance charge will be added to the unpaid balance. The finance charge is based on an annual percentage rate of 18%."

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:
$190	$50.00	$140.00	3	$50.00	$4.35	$194.35
290	70.00	220.00	5	50.00	9.25	299.25
390	95.00	295.00	6	50.00	16.19	406.19

Peg feels that the finance charge of $4.35 is in error.

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