**Example of Life Insurance Premium Calculation**Peg Gasperoni purchased a $50,000 life insurance policy for $190 per year from Ryan Life Insurance Company. She received the following billing instructions along with a premium plan example:**Insurance Premium Payment Options:**- The premium notice will be mailed shortly.- You have the option to pay the entire premium in full without a finance charge.- Alternatively, pay in installments after a down payment, with a balance over monthly installments of $50.- A finance charge applies to the unpaid balance at an annual rate of 18%.**Billing Example:**| If the total policy premium is: | $190 ||-------------------------------|------|| And you put down: | $50 || The balance subject to finance charge will be: | $140.00 || The total number of monthly installments ($30 minimum) will be: | 3 || The monthly installment before adding the finance charge will be: | $50.00 || The total finance charge for all installments will be: | $4.35 || And the total deferred payment price will be: | $194.35 |If down payment and balance vary:| Down Payment | Balance | Installments | Finance Charge | Total Deferred Price ||--------------|---------|--------------|----------------|-----------------------|| $90 | $100 | 2 | $2.25 | $192.25 || $90 | $290 | 6 | $16.19 | $406.19 |Peg believes the finance charge of $4.35 is incorrect.**Challenge:**- Calculate the actual finance charge for the first three months, rounding your answer to the nearest cent.**Solution:**- The correct Finance Charge is: **$4.96**

INTRODUCTION: A finance charge is a fee levied for the usage of credit or the extension of current credit. It can be a flat cost or a percentage of borrowings, with percentage-based financing charges being the most frequent. A finance charge is sometimes an aggregated cost that includes the cost of carrying the debt as well as any related transaction fees, account management fees, or late fees paid by the lender.Given, Total amount of life insurance policy that peg Gasperoni bought = $50,000Insurance policy per year = $190Annual Percentage rate = 18% For the First month finance charge = (190-50) x 18%12=140 x 181200=2,5201200=2110=$2.10 For Second month finance charge = (140-50) x 18%12= 90 x 18100 x 12=1,6201200=$1.35 For Third month, the finance charge = (90-50) x 18%12=40 x 181200=7201200=$0.6 The total actual finance charge for the first three months = $2.10 + $1.35 + $0.6= $4.05