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REVIEW EXERCISES | CHAPTER 13—SECTION I
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REVIEW EXERCISES
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CHAPTER 13—SECTION I
REVIEW EXERCISES
Number of
Dates
Days
Activity
Oct 1–12
2
Previous balance
Oct 3–6
4
1 50.00
Oct 7–9
3
2 75.00
Oct 10–15
6
1 26.69
Oct 16–24
9
2 40.00
7
Oct 25–31
1122.70
Days in cycle:
31
4,721.08
5 $152.29
Average daily balance 5
31
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Unpaid
Balance
$140.00
190.00
115.00
141.69
101.69
224.39
Daily
Balance
$ 280.00
760.00
345.00
850.14
915.21
1,570.73
$4,721.08
CHAPTER 13—SECTION I
REVIEW EXERCISES
Number of
Dates
Days
Activity
Feb 1–5
5
Previous balance
Feb 6–8
3
2 58.00
Feb 9–14
6
1 95.88
Feb 15–23
9
1 129.60
Feb 24–26
3
2 21.15
2
Feb 27–28
1 100.00
Days in cycle:
28
4,438.25
5 $158.51
Average daily balance 5
28
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Unpaid
Balance
$ 69.50
11.50
107.38
236.98
215.83
315.83
Daily
Balance
$ 347.50
34.50
644.28
2,132.82
647.49
631.66
$4,438.25
CHAPTER 13—SECTION I
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REVIEW EXERCISES | CHAPTER 13—SECTION I
13.
REVIEW EXERCISES
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Unpaid
Balance
$324.45
481.24
331.24
376.84
721.34
Daily
Balance
$ 1,297.80
2,887.44
1,324.96
753.68
10,820.10
$17,083.98
CHAPTER 13—SECTION I
Number of
Dates
Days
Activity
Mar 1–4
4
Previous balance
Mar 5–10
6
1 156.79
Mar 11–14
4
2 150.00
Mar 15–16
2
1 45.60
15
Mar 17–31
1 344.50
Days in cycle:
31
17,083.98
Average daily balance ⫽
⫽ $551.10
31
15%
5 .0125
Periodic rate 5
12
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REVIEW EXERCISES
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CHAPTER 13—SECTION I
REVIEW EXERCISES
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CHAPTER 13—SECTION I
c.
Remaining credit 5 30,000.00 2 9,957.14 5 $20,042.86
On April 1, how much credit does Rocky Mountain have left on the account?
15. The Rocky Mountain Corporation has a $30,000 line of credit with NationsBank. The
annual percentage rate is the current prime rate plus 4.7%. The balance on March 1
was $8,400. On March 6, Rocky Mountain borrowed $6,900 to pay for a shipment of
supplies, and on March 17 it borrowed another $4,500 for equipment repairs. On March
24, a $10,000 payment was made on the account. The billing cycle for March has 31
Unpaid
Daily
days. The current prime rate is 9%.
Dates
# of Days
Activity
Balance
Balance
a. What is the finance charge on the account?
Previous
(9% 1 4.7% )
Mar 1–5
5
balance
8,400.00
42,000.00
Finance charge 5 13,783.87 3
12
Mar 6–16
11
1 6,900.00
15,300.00
168,300.00
5 13,783.87 3 1.14%
Mar 17–23
7
1 4,500.00
19,800.00
138,600.00
5 $157.14
8
78,400.00
Mar 24–31
2 10,000.00
9,800.00
b. What is Rocky Mountain’s new balance?
31
$427,300.00
New balance 5 8,400.00 1 157.14 1 11,400.00 2 10,000.00
427,300.00
5 $13,783.87
Average daily balance 5
5 $9,957.14
31
Shortcut New balance 5 9,800.00 1 157.14 5 $9,957.14
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BUSINESS DECISION
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CHAPTER 13—SECTION I
b.
a.
(See Appendix B)
Silver: Better deal by $28.54
$73.99
Silver 5 2 $45.45
$28.54
Gold 5
Which card is the better deal and by how much?
Silver 5 $45.45
Gold 5 $73.99
Based on this information, calculate the interest charged by each card for this
purchase.
16. On October 22, you plan to purchase a $3,000 computer by using one of your two
credit cards. The Silver Card charges 18% interest and calculates interest on the previous month’s balance. The Gold Card charges 18% interest and calculates interest
based on the average daily balance. Both cards have a $0 balance as of October 1.
Your plan is to make a $1,000 payment in November, a $1,000 payment in December, and pay off the remaining balance in January. All your payments will be received
and posted on the 10th of each month. No other charges will be made on the account.
PICK THE RIGHT PLASTIC
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Payment
$1,000.00
Payment
$1,000.00
Activity
Purchase
1$3,000.00
$15.45
$30.00
Interest
GOLD Periodic Rate 5
18%
5 1.5%
12
Payment
Jan 10
$1,045.45
Total Interest 30.00 1 15.45 5 $45.45
Dec 10
Jan 1
Nov 10
Dec 1
Oct 22
Nov 1
Date
18%
5 1.5%
12
|
CHAPTER 13—SECTION I
0
1,030.00
1,045.45
2,000.00
2,030.00
$3,000.00
3,000.00
New Balance
BUSINESS DECISION
16a. SILVER Periodic Rate 5
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Number of
Days
Dates
Oct 1–21
Oct 22–31
ADB 5
BUSINESS DECISION | CHAPTER 13—SECTION I
21
10
31
30,000.00
5 $967.74
31
Nov 1–9
9
Nov 10–30
21
30
ADB 5
9
Dec 10–31
22
31
ADB 5
9
Jan 10–31
22
31
ADB 5
Purchase
$3,000.00
0
$3,000.00
0
$30,000.00
30,000.00
Fin. Charge 5 967.74 3 1.5% 5 $14.52
3014.52
27,130.68
2014.52
42,304.92
69,435.60
Fin. Charge 5 2314.52 3 1.5% 5 $34.72
2,049.24
18,443.16
1,049.24
23,083.28
41,526.44
Fin. Charge 5 1339.56 3 1.5% 5 $20.09
Fin. Ch.
$20.09
Payment
1,069.33
9,623.97
5 $310.45
31
TOTAL INTEREST
Daily Balance
Fin. Ch.
$34.72
Payment
1,000.00
41,526.44
5 $1,339.56
31
Jan 1–9
Unpaid Balance
Fin. Ch.
$14.52
Payment
1,000.00
69,435.60
5 $2,314.52
30
Dec 1–9
Activity
1,069.33
9,623.97
0
0
9,623.97
Fin. Charge 5 $310.45 3 1.5% 5 $4.66
14.52 1 34.72 1 20.09 1 4.66 5 $73.99
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REVIEW EXERCISES | CHAPTER 13—SECTION I I
Calculate the amount financed, the finance charge, and the total deferred payment
price for the following installment loans:
Purchase
(Cash)
Price
1. $1,400
2. $3,500
3. $12,000
4. $2,900
5. $8,750
Down
Payment
Amount
Financed
Monthly
Payments
Number of
Payments
$350
20%
10%
0
15%
$1,050.00
$68.00
$257.00
$375.00
$187.69
$198.33
24
12
36
18
48
$2,800.00
$10,800.00
$2,900.00
$7,437.50
Finance
Charge
Total
Deferred
Payment
Price
$582.00
$1,982.00
$284.00
$3,784.00
$2,700.00
$14,700.00
$478.42
$3,378.42
$2,082.34
$10,832.34
Calculate the amount financed, the finance charge, and the amount of the monthly
payments for the following add-on interest loans:
Purchase
(Cash)
Price
6.
$788
7. $1,600
8. $4,000
9. $17,450
10. $50,300
Down
Payment
10%
$250
15%
$2,000
25%
Amount
Financed
$709.20
$1,350.00
$3,400.00
$15,450.00
$37,725.00
Add-On
Interest
Number of
Payments
8%
10%
1112%
14%
12.4%
12
24
30
48
60
Finance
Charge
Monthly
Payment
$56.74
$63.83
$270.00
$67.50
$977.50
$145.92
$8,652.00
$502.13
$23,389.50
$1,018.58
T13-13
REVIEW EXERCISES | CHAPTER 13—SECTION I I
Calculate the finance charge, finance charge per $100, and the annual percentage rate
for the following installment loans by using the APR table, Table 13-1:
Amount
Financed
11. $2,300
12. $14,000
13. $1,860
14. $35,000
Number of
Payments
Monthly
Payment
24
36
18
60
$109.25
$495.00
$115.75
$875.00
Finance
Charge
Finance Charge
per $100
APR
$322.00
$14.00
13%
$3,820.00
$27.29
16.5%
$223.50
$12.02
14.75%
$17,500.00
$50.00
17.25%
Calculate the finance charge and the annual percentage rate for the following installment loans by using the APR formula:
Amount
Financed
15.
$500
16. $2,450
17. $13,000
18. $100,000
Number of
Payments
Monthly
Payment
Finance
Charge
APR
12
36
48
72
$44.25
$90.52
$373.75
$2,055.50
$31.00
11.25%
$808.72
19.39%
$4,940.00
16.6%
$47,996.00
13.65%
T13-14
REVIEW EXERCISES | CHAPTER 13—SECTION I I
Calculate the finance charge and the monthly payment for the following loans by using the APR
table, Table 13-1:
Amount
Financed
Number of
Payments
APR
48
36
12
18
13.5%
12%
11.25%
14%
19. $5,000
20. $7,500
21. $1,800
22.
$900
Table
Factor
Finance
Charge
Monthly
Payment
29.97
$1,498.50
$135.39
19.57
$1,467.75
$249.10
6.20
$111.60
$159.30
11.45
$103.05
$55.73
Calculate the missing information for the following installment loans that are being paid off
early:
Number of
Payments
23.
24.
25.
26.
12
36
24
60
Payments
Made
Payments
Remaining
Sum of Digits
Payments
Remaining
Sum of Digits
Number of
Payments
4
22
9
40
8
36
78
36/78
14
105
666
105/666
15
120
300
120/300
20
210
1,830
Rebate
Fraction
210/1,830
You are the loan department supervisor for the Pacific National Bank. The following installment loans are being paid off early, and it is your task to calculate the rebate fraction, the finance charge rebate, and the payoff for each loan:
Amount
Financed
27. $3,000
28. $1,600
29. $9,500
30. $4,800
Number of
Payments
Monthly
Payment
Payments
Made
Rebate
Fraction
Finance
Charge
Rebate
24
18
48
36
$162.50
$104.88
$267.00
$169.33
9
11
36
27
120/300
$360.00
$2,077.50
28/171
$47.13
$687.03
78/1,176
$219.94
$2,984.06
45/666
$87.56
$1,436.41
Loan
Payoff
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REVIEW EXERCISES | CHAPTER 13—SECTION I I
31. Ana Luisa Bridges is interested in buying a dining room set for her home. At Styline
Furniture, she picks out a seven-piece set for a total cash price of $1,899.00. The salesperson informs her that if she qualifies for an installment loan, she may pay 10% now,
as a down payment, and finance the balance with payments of $88.35 per month for
24 months.
a.
What is the amount of the finance charge on this loan?
Amount financed 5 1,899.00(100% 2 10%)
5 $1,709.10
b.
Total payments
5 88.35 3 24
5 $2,120.40
Finance charge
5 2,120.40 2 1,709.10
5 $411.30
What is the total deferred payment price of the dining room set?
Total deferred price 5 411.30 1 1,899.00
5 $2,310.30
32. Randy Iverson found a time-share condominium he wanted
to buy in Miami Beach. He had the option of paying $7,600
in cash or financing the condo with a 2-year installment loan.
The loan required a 20% down payment and equal monthly
payments of $283.73.
a.
What is the finance charge on Randy’s loan?
Amount financed 5 7,600.00(100% 2 20%) 5 $6,080.00
Total payments 5 283.73 3 24 5 $6,809.52
Finance charge 5 6,809.52 2 6,080.00 5 $729.52
b.
What is the total deferred payment price of the condo?
Total deferred price 5 729.52 1 7,600.00 5 $8,329.52
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REVIEW EXERCISES | CHAPTER 13—SECTION I I
33. Carolyn DeBaca financed a trip to Europe with a 5% add-on interest installment loan
from her bank. The total price of the trip was $1,500.00. The bank required equal
monthly payments for 2 years. How much are Carolyn’s monthly payments?
Finance charge 5 1,500.00 3 .05 3 2 5 $150.00
Total payments 5 150.00 1 1,500.00 5 $1,650.00
Monthly payment 5
1,650.00
5 $68.75
24
34. Chuck Wells bought fishing equipment with a 9% add-on interest installment loan
from his credit union. The purchase price of the equipment was $1,450.00. The credit
union required a 15% down payment and equal monthly payments for 48 months.
How much are Chuck’s monthly payments?
Amount financed 5 1,450.00 (100% 2 15%)
5 1,232.50
Total payments 5 1,232.50 1 443.70
5 $1,676.20
Monthly payment 5
I 5 PRT
I 5 1,232.50 3 .09 3 4
1,676.20
48
5 $34.92
I 5 443.70
35. Bill Hendee purchased a jet ski for $8,350. He made a down payment of $1,400 and
financed the balance with monthly payments of $239.38 for 36 months.
a.
What is the amount of the finance charge on the loan?
Amount financed 5 8,350.00 2 1,400.00
5 $6,950.00
Total payments 5 239.38 3 36
5 $8,617.68
Finance charge
b.
5 8,617.68 2 6,950.00
5 $1,667.68
Use Table 13-1 to find what annual percentage rate was charged on Bill’s loan.
Table factor 5
1,667.78 3 100
5 24.00
6,950.00
APR 5 14.5%
REVIEW EXERCISES
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CHAPTER 13—SECTION II
Finance charge 5 2,040.00 2 1,700.00
5 $340.00
Total payments 5 42.50 3 48
5 $2,040.00
APR 5 9.21%
24,480
24,480
72 3 340.00
5
5
(3 3 1,700 3 49) 1 (340 3 47)
249,900 1 15,980
265,880
51,700.00
Amount financed 5
2,400.00 2 700.00
36. Van Morris purchased an artist’s studio desk for $2,400. He made a $700 down payment and financed the balance with an installment loan for 48 months. If Van’s payments are $42.50 per month, use the APR formula to calculate what annual percentage rate he is paying on the loan.
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REVIEW EXERCISES
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CHAPTER 13—SECTION II
1,300.00 3 16.65
100
5 $216.45
Total finance charge 5
Table factor for 15.25% for 24 months 5 16.65
216.45 1 1,300.00
24
5 $63.19
Monthly payment 5
37. The Electronic Showcase uses the First American Bank to finance customer purchases.
This month, the bank is offering 24-month installment loans with an APR of 15.25%.
For qualified buyers, no down payment is required. If Alton Amidon wants to finance
a complete stereo system for $1,300, use the APR tables to calculate the finance charge
and the amount of the monthly payment on his loan.
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T13-19
REVIEW EXERCISES | CHAPTER 13—SECTION I I
38. At a recent boat show, MegaBank was offering boat loans for up to 5 years, with APRs
of 13.5%. On new boats, a 20% down payment was required. Preston Morgan wanted
to finance a $55,000 boat for 5 years.
a.
What would be the finance charge on the loan?
Amount financed 5 55,000.00 (100% 2 20%)
5 $44,000.00
Finance charge 5 44,000.00 3 .135 3 5
5 $29,700.00
b.
What would be the amount of the monthly payment?
Monthly payment 5
29,700.00 1 44,000.00
60
5 $1,228.33
39. Find the sum of the digits of
a.
Sum of digits 5
24
2
b. 30
30 3 31
5 465
2
24 3 25
5 300
2
40. a.
n(n 1 1)
What is the rebate fraction of a 36-month loan paid off after the 14th payment?
36 2 14 5 22
22 3 23
5 253
2
Rebate fraction 5
253
666
36 3 37
5 666
2
b.
What is the rebate fraction of a 42-month loan paid off after the 19th payment?
42 2 19 5 23
23 3 24
5 276
2
42 3 43
5 903
2
Rebate fraction 5
276
903
T13-20
REVIEW EXERCISES | CHAPTER 13—SECTION I I
41. Bob Googins financed a $3,500 Hobie Cat sailboat with an 8% add-on interest installment loan for 24 months. The loan required a 10% down payment.
a.
What is the amount of the finance charge on the loan?
Amount financed 5 3,500.00(100% 2 10%)
5 $3,150.00
5 3,150.00 3 .08 3 2
5 $504.00
Finance charge
b.
How much are Bob’s monthly payments?
Monthly payment 5 504.00 1 3,150.00
5
3,654.00
24
5 $152.25
c.
What annual percentage rate is being charged on the loan?
72 3 504.00
(3 3 3,150.00 3 25) 1 (504 3 23)
APR by table 5
5
36,288.00
236,250.00 1 11,592.00
Table 13-1, 16.00, 24 periods 5 14.75%
5
36,288.00
247,842.00
APR by formula 5
504.00 3 100
5 16.00 factor
3,150
5 14.64%
d.
If Bob decides to pay off the loan after 16 months, what is his loan payoff?
24 2 16 5 8
839
5 36
2
24 3 25
5 300
2
Rebate fraction 5
Payoff amount 5 8 3 152.25
5 1,218.00 2 60.48
5 $1,157.52
36
300
Rebate amount 5 504.00 3
36
5 $60.48
300
T13-21
BUSINESS DECISION | CHAPTER 13—SECTION I I
READING THE FINE PRINT
The advertisement for Digital Warehouse shown on page 451 appeared in your local newspaper this morning. Answer the questions that follow based on the information in the ad:
c.
b.
42. a.
BUSINESS DECISION
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CHAPTER 13—SECTION II
Interest 5 $386.41
22.73% Interest is charged
If that payment is late or less than required, what happens and how much does
that amount to?
$1,699.99
What is the required amount of that payment?
February of next year
If you purchased the TV on January 24th of this year and the billing date of the
installment loan is the 15th of each month, when would your first payment be due?
T13-22