Deck 14: Installment Purchases

Question 1

​Change the monthly rates to annual rates.
​
a.1.3% =
__________
b.1.75% =
__________
c.0.75% =
__________

Answer 1

Question 2

Turner Landscape Supply, Inc., has the following credit terms: "The finance charge, if any, is based on the previous balance before payments or credits are deducted. The rates are 1.4% per month up to $1,250 and 1.2% per month on amounts in excess of $1,250. These are annual percentage rates of 16.8% and 14.4%, respectively. There is no finance charge if the full amount of the new balance is paid within 30 days after the cycle closing date."Compute the payment and purchase history of one customer, Hertzer Landscaping, for two consecutive months. Assume that both payments were made within the 30-day period.
​​

Answer 2

Question 3

Change the monthly rates to annual rates.
​
a.1.25% =
__________
b.0.5% =
__________
c.0.8% =
__________

Answer 3

Question 4

Change the annual rates to monthly rates.
​
a.21% =
__________
b.20%=
__________
c.9% =
__________

Question 5

Change the monthly rates to annual rates.
​
a.1%=
__________
b.1.5%=
__________
c.1/3% =
__________​

Question 6

Turner Landscape Supply, Inc., has the following credit terms: "The finance charge, if any, is based on the previous balance before payments or credits are deducted. The rates are 1.4% per month up to $1,250 and 1.2% per month on amounts in excess of $1,250. These are annual percentage rates of 16.8% and 14.4%, respectively. There is no finance charge if the full amount of the new balance is paid within 30 days after the cycle closing date."Compute the finance charge and the new balance for the two customers shown below. Assume that both payments were made within the 30-day period.
​

Question 7

Convert the annual rate to a monthly rate. Then, compute the simple interest on a monthly basis. Round answers to the nearest cent.
​

Question 8

Change the annual rates to monthly rates.
​
a.18% =
__________
b.12% =
__________
c.8.4%=
__________

Question 9

Bill's Appliance Store offers the following credit terms: "The finance charge is based upon the net balance if payment is made within 25 days of the billing date. If payment is made after 25 days, then the finance charge is based on the previous balance. Net balance equals previous balance less payments, returns and credits. In either case, the monthly interest rate is 1.25% on the first $750 of the net balance and 0.75% on any amount over $750."Compute the net balance, the finance charge, and the new balance for the two customers shown below. Assume that both payments were made within the 25-day period.
​

Question 10

Western Farm Machinery has the following credit terms: "The finance charge, if any, is based on the previous balance before payments or credits are deducted. The rates are 1.5% per month up to $1,000 and 1.25% per month on amounts in excess of $1,000. These are annual percentage rates of 18% and 15%, respectively. There is no finance charge if the full amount of the new balance is paid within 30 days after the cycle closing date."Compute the finance charge and the new balance for the two customers shown below. Assume that both payments were made within the 30-day period.
​​

Question 11

Convert the annual rate to a monthly rate. Then, compute the simple interest on a monthly basis. Round answers to the nearest cent.
​

Question 12

Change the annual rates to monthly rates.
​
a.16% =
__________
b.15% =
__________
c.6% =
__________

Question 13

Change the annual rates to monthly rates.
​
a.9.8% =
__________
b.7.2% =
__________
c.8% =
__________

Question 14

Change the monthly rates to annual rates.
​
a.0.6% =
__________
b.0.4% =
__________
c.1.2% =
__________​

Question 15

Convert the annual rate to a monthly rate. Then, compute the simple interest on a monthly basis. Round answers to the nearest cent.
​

Question 16

​Convert the annual rate to a monthly rate. Then, compute the simple interest on a monthly basis. Round answers to the nearest cent.
​

Question 17

Thompson Lubricating store has the following credit terms: "The finance charge, if any, is based on the previous balance before payments or credits are deducted. The rates are 1.5% per month up to $1,300 and 1.3% per month on amounts in excess of $1,300. These are annual percentage rates of 15.7% and 13.02%, respectively. There is no finance charge if the full amount of the new balance is paid within 30 days after the cycle closing date."Compute the finance charge and the new balance for the two customers shown below. Assume that both payments were made within the 30-day period.
​

Question 18

Eden Valley Patio Furniture has the following credit terms: "The finance charge, if any, is based on the previous balance before payments or credits are deducted. The rates are 1.5% per month up to $1,000 and 1.25% per month on amounts in excess of $1,000. These are annual percentage rates of 18% and 15%, respectively. There is no finance charge if the full amount of the new balance is paid within 30 days after the cycle closing date."Compute the finance charge and the new balance for the two customers shown below. Assume that both payments were made within the 30-day period.

Question 19

Convert the annual rate to a monthly rate. Then, compute the simple interest on a monthly basis. Round answers to the nearest cent.
​

Question 20

Change the annual rates to monthly rates.
​
a.10.5% =
__________
b.8.3%=
__________
c.9%=
__________

Question 21

Eric Russell borrowed $2,400 from a financial loan company which amortized the loan at 12% over 3 months. Using Table 14-1, the first two monthly payments are $816.05. (The last payment may be slightly different.) Complete the amortization schedule and solve the effective rate problem.​
​

Question 22

Melinda Paczniak borrowed $4,000 from a private source. Melinda agreed to repay the principal in four installments of $1,000 each. In addition, she paid interest each month, which was calculated by taking 1.5% (monthly rate) of the unpaid balance. Complete Melinda's loan payment schedule. Then, use Melinda's loan payment schedule to solve the effective rate problem.
​

Question 23

Arnold and Lorna Sampson wanted to borrow $35,000 to remodel their kitchen. They were able to get a second mortgage which provided the funds amortized at 9% for 5 years. Use Table 14-1. Compute the size of the Sampson's monthly mortgage payment.

Question 24

After getting a bonus, a raise, and a promotion to senior account executive, Daisy Chu bought a new car. With her old car as a trade-in and her bonus as an additional down payment, Daisy needed to borrow $16,000. Her credit union amortized the loan over four years at 9%. Use Table 14-1 to determine the size of Daisy's monthly payments.

Question 25

Anne Harrison borrowed $900 from her uncle to pay off her credit card bill. Anne agreed to repay the principal in three monthly installments of $300 each. Anne's uncle charged interest of 0.75% (monthly rate) on the unpaid balance each month. Complete Anne's loan payment schedule. Then, use Anne's loan payment schedule to solve the effective rate problem.
​

Question 26

Cathy Cortez-Ochoa borrowed $4,000 from her uncle who amortized the loan at 4.5% over 3 months. Using Table 14-1, the first two monthly payments are $1,343.35 each. (The last payment may be slightly different.) Complete the amortization schedule and solve the effective rate problem.

Question 27

Billy North loaned $2,250 to his former college roommate, Jerold Weinsted. Jerold agreed to repay the principal in three monthly installments of $750 each. Billy charged interest at 0.5% (monthly rate) on the unpaid balance each month. Complete the North-Weinsted loan payment schedule. Then, use the North-Weinsted loan payment schedule to solve the effective rate problem.]

Question 28

Alex Petrovich borrowed $4,800 from a finance company which amortized the loan at 9% over 4 months. Using Table 14-1, the first three monthly payments are $1,222.58 each. (The last payment may be slightly different.) Complete the amortization schedule and solve the effective rate problem.
​

Question 29

Campbell Financing Corp. amortizes most of the loans it writes. Use Table 14-1 to compute the monthly payments for the following loans.
​
a.$3,500 at 6% for 2 months ________
b.$6,200 at 9% for 4 months ________
c.$130,000 at 12% for 6 years ________

Question 30

Mary and John Morey bought a large brand new house. They borrowed $350,000 which was to be amortized at 6% over 30 years. Use Table 14-1. Compute the size of the Morey's monthly mortgage payment.​

Question 31

Lawrence and Cynthia Tyler bought a large brand new house. They borrowed $275,000 which was to be amortized at 7.5% over 20 years. Use Table 14-1. Compute the size of the Tyler's monthly mortgage payment.

Question 32

Edison Restaurant Supply offers the following credit terms: "The finance charge is based upon the net balance if payment is made within 25 days of the billing date. If payment is made after 25 days, then the finance charge is based on the previous balance. Net balance equals previous balance less payments, returns and credits. In either case, the monthly interest rate is 1.3% on the first $500 of the net balance and 1.1% on any amount over $500."Compute the net balance, the finance charge, and the new balance for customer Kimberley's Kitchen for two consecutive months. Assume that both payments were made within the 25-day period.
​

Question 33

​ ​
Tri-City Financing Corp. amortizes most of the loans that it writes. Use Table 14-1 to compute the monthly payments for the following loans.​
​
a.$2,500 at 10.5% for 4 months ________
b.$4,200 at 4.5% for 5 months ________
c.$125,000 at 7.5% for 5 years ________

Question 34

As an employee fringe benefit, Keenan Holte loaned $6,000 to one of his employees. The employee was required to repay the principal in four monthly installments of $1,500 each. In addition, Keenan charged a small amount of interest each month 1/4% (monthly rate) of the unpaid balance. Complete the loan payment schedule. Then, use Keenan's loan payment schedule to solve the effective rate problem.
​

Question 35

Bill and Dick Johnston wanted to borrow $15,500 for four months for their business. A local bank offered to make a loan to be amortized at 12%. Using Table 14-1, the first three monthly payments are $3,972.36 each. (The last payment may be slightly different.) Complete the amortization schedule and solve the effective rate problem.
​