# Project #82701 - Installment Loans and Open-End Credit

Chapter 14

1)

Mindie Hunsaker is thinking about buying a car and getting a 3-year loan from her bank in the amount of \$7,200. Her monthly payment will be \$200 (\$7,200 36 = \$200). (T or F)

A True B False

2)

Suppose you get a 7.75% installment loan and are charged a \$100 front-end processing fee. Your APR will be:

A 7.75% B Less than 7.75% C Greater than 7.75%

For Problems 3-5, assume that you are thinking about buying a truck.

3)

The truck you have in mind is priced at \$29,200. You must pay tax and license fees of \$1,900. Your credit union will make you a loan at 7.9% for 6 years. You have \$3,000 to use toward the purchase. How much will you need to borrow?

A \$31,100 B \$28,100 C \$26,000 D \$30,000

4)

You get the loan. Your monthly payment is \$491.31. What is the finance charge?

A \$7,274.32 B \$4,274.32 C \$9,174.32 D \$5,374.32

5)

What is the total cost of the truck, including finance charge?

A \$38,374.32 B \$31,100 C \$35,374.32 D \$36,474.32

6)

You are thinking about buying a tent trailer, priced at \$5,800. You must pay tax and license fees of \$400. You have \$900 and your credit union will loan you the remaining \$5,300 with 24 monthly payments of \$235.18; there are no front-end fees. What is the total cost of the tent trailer, including finance charges?

A \$6,700 B \$6,544.32 C \$6,200 D \$6,144.37

Unit 14.2 Paying off an installment loan

7)

Interest is more during the first part of an installment loan. (T or F)

A True B False

8)

With the U.S. Rule, interest is calculated on the basis of a 365-day year. (T or F)

A True B False

9)

With the U.S. Rule, the lender calculates interest through which date:

A The due date

B The date shown on the borrowers check

C The postmark date on the borrowers envelope

D The date received by the lender

10)

You get a car loan on May 3. Your first monthly payment is due June 3. The lender receives your payment on June 4. For how many days is interest calculated?

A 32 days B 30 days C 31 days D 29 days

11)

You buy a moped on September 1 for \$800 with \$200 down. You agree to pay the seller the remaining \$600 at 10% interest with two monthly payments of \$303.76. The seller receives your first payment on October 3 and receives your final payment on October 29. Calculate interest for the October 29 payment using the U.S. Rule. Remember, the final payment may be slightly different because of rounding and actual payment date.

A \$301.50 B \$0.00 C \$5.26 D \$2.15

12)

Zubair Habib has been making payments on his 14% motorcyle loan for what seems like forever! Zubair made a payment June 1. His balance after that payment was \$1,492.33. Zubair just got a \$3,000 bonus from his employer and decides to use part of the money to pay off the loan on June 18. Calculate the payoff amount.

A \$1,502.06 B \$1,492.33 C \$1,482.60 D \$1,502.63

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Unit 14.3 Open-end credit

13)

For an annual rate of 11.5%, find the daily periodic rate (using a 365-day year). Express the rate with 6 decimal places.

A 0.031507% B 9.58% C 0.958333% D 3.1507%

14)

You are thinking about getting a credit card. One credit card company charges interest at 1.25% per month. Another charges interest at 11.9% per year. The 11.9% rate is lower. (T or F)

A True B False

15)

You have a charge card. You receive a bill dated June 5. Your previous bill was dated May 5. Calculate your average daily balance.

A \$350 B \$9,860 C \$318.06 D \$328.67

16)

Refer to Problem 15. Calculate the monthly finance charge, assuming you are charged a monthly periodic rate of 1.75%.

A \$172.55 B \$5.75 C \$5.57 D \$6.13

17)

Calculate the finance charge on a home equity loan based on an average daily balance of \$24,100 during a 31-day billing period. The lender charges 8.25% interest and calculates interest based on the resulting daily periodic rate. Assume a 365-day year and round the daily periodic rate to 8 decimal places.

A \$163.42 B \$0.02260274 C \$168.84 D \$168.87

Challenge problems

For Problems 18-22, assume that you buy a car for \$6,700. You must also pay tax and license fees of \$550. You have \$700. Your credit union will make you a 3-year car loan at 7.5% interest.

18)

What amount do you need to borrow?

A \$7,250 B \$6,000 C \$1,250 D \$6,550

19)

You get the loan on September 4, with monthly payments of \$203.75. What is your total finance charge?

A \$785 B \$850 C \$1,335 D \$780

20)

What is the total cost of the car, including finance charges?

A \$7,485 B \$8,585 C \$8,035 D \$8,000

21)

Your monthly payments are due on the 4th of each month, starting October 4. The lender receives your first monthly payment (\$203.75) on October 2. For your second monthly payment, you pay \$300; the lender receives the payment on November 5. Calculate the remaining balance, using the U.S. Rule, after the November 5 payment.

A \$6,383.93 B \$44.60 C \$6,128.53 D \$255.40

22)

Two and one-half years later, after making payment 30 on April 3, your balance is \$742.33. You get your income tax refund and decide to use part of the money to pay off the loan on April 27. Calculate the payoff amount.

A \$3.66 B \$745.99 C \$738.67 D \$746.91

 Subject Mathematics Due By (Pacific Time) 09/25/2015 12:00 am
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