Question 1

The APR represents the:

Accepted Answer

APR stands for Annual Percentage Rate, which is the true effective annual rate of interest charged by the lender or seller. It includes not only the stated interest rate, but also any fees or charges associated with the loan or purchase.

Question 2

A condo in Orange Beach, Alabama, listed for $1.4 million with 20% down and financing at 5% for 30 years. What would the monthly payment be?

Accepted Answer

The answer of A condo in Orange Beach, Alabama, listed...

Question 3

Amanda Chin purchased a home for $296,000; she put 20% down with a mortgage rate of 6% for 30 years. What is Amanda's monthly payment?

Accepted Answer

To find Amanda's monthly payment, we need to use the formula for mortgage payment:

Payment = P [ r(1+r)^n / ((1+r)^n - 1) ]

where P is the principal (the amount she borrowed), r is the monthly interest rate (6% divided by 12), and n is the total number of payments (30 years times 12 months). First, we need to find P, which is 80% of the purchase price:

P = 0.8 x $296,000 = $236,800

Next, we need to find the monthly interest rate:

r = 6% / 12 = 0.005

Finally, we can plug in the numbers:

Payment = $236,800 [ 0.005(1+0.005)^360 / ((1+0.005)^360 - 1) ]

Payment = $1,420.80

Therefore, Amanda's monthly payment is $1,420.80.

Question 4

Ed Sloan bought a new Explorer for $22,000. He put down $7,000 and paid $290 for 60 months. The total finance charge to Ed is:

Accepted Answer

The answer of Ed Sloan bought a new Explorer for...

Question 5

The average daily balance is equal to the sum of daily balances:

Accepted Answer

To find the average daily balance, we need to add up the daily balances for the entire billing cycle and then divide by the number of days in the billing cycle. Therefore, the correct choice is C, which states that the average daily balance is divided by the number of days in the billing cycle.

Question 6

Given a mortgage of $48,000 for 15 years with a rate of 11%, what are the total finance charges?

Accepted Answer

The answer of Given a mortgage of $48,000 for 15...

Question 7

In calculating the daily balance, cash advances are:

Accepted Answer

Cash advances are considered part of the balance on the credit card, so they are added in when calculating the daily balance.

Question 8

John Sullivan bought a new Brunswick boat for $17,000. He made a $2,500 down payment on it. The bank's loan was for 60 months. Finance charges totaled $4,900. His monthly payment is:

Accepted Answer

The total amount that the bank loaned to John Sullivan was $17,000 - $2,500 = $14,500. Including the finance charges, he will be paying back a total of $14,500 + $4,900 = $19,400 over the course of 60 months, or 5 years.
To calculate the monthly payment, we can use the formula: 
Monthly Payment = (Principal + Interest) / Number of Months
Plugging in the values:
Monthly Payment = ($19,400) / (60)
Monthly Payment = $323.33
Therefore, John Sullivan's monthly payment is $323.33.

Question 9

Jen purchased a condo in Naples, Florida, for $699,000. She put 20% down and financed the rest at 5% for 35 years. What are Jen's total finance charges?

Accepted Answer

First, we need to calculate the amount that Jen financed.

20% of $699,000 = $139,800 (down payment) 
$699,000 - $139,800 = $559,200 (amount financed)

Now, we can use a loan amortization calculator to determine the total finance charges. Using a calculator, we find that the total finance charges are $626,863.20.

Therefore, the correct answer is choice C.

Question 10

Darlene Ramirez bought a home for $140,000. She put 20% down with a mortgage rate of 7.5% for 25 years. Her yearly payments are:

Accepted Answer

The answer of Darlene Ramirez bought a home for $140,000....

Question 11

Mia Lane bought a high-definition television for $7,500. Based on her income, she could afford to pay back only $600 per month. There is 1 ½% monthly interest charge on the unpaid balance. The U.S. Rule is used in the calculation. At the end of month 1, the balance outstanding is:

Accepted Answer

The balance at the end of month 1 can be calculated by first adding the 1 ½% monthly interest charge on the unpaid balance of $7,500, which is $112.50 (7500 * 0.015). So, the new balance before payment is $7,612.50. After paying $600, the outstanding balance is $7,012.50, which is not listed among the options provided.

Question 12

Open credit in a revolving charge plan results in:

Accepted Answer

Open credit in a revolving charge plan allows the customer to make as many charged purchases as they want until they have reached their credit limit.

Question 13

Most companies calculate the finance charge on credit card accounts as a percentage of the:

Accepted Answer

Most credit card companies use the average daily balance method to calculate the finance charge. This method takes the sum of the daily balances for the billing period and divides by the number of days in the billing period to determine the average daily balance. The finance charge is then calculated as a percentage of this average daily balance.

Question 14

Pete Size read the following partial advertisement: Price $20,999; down payment $1,000; cash or trade; $390.85 per month for 60 months. Calculate (A) the total finance charge and (B) the APR by table lookup.
A. $3,452;
B. Between 6.25% and 6.5%

Accepted Answer

The answer of Pete Size read the following partial advertisement:...

Question 15

Justin Chan bought a Scion car for a price of $8,200, putting down $800 and financing the remainder with 60 monthly payments of $179.99. The APR by table lookup is (use the tables in the handbook):

Accepted Answer

The answer of Justin Chan bought a Scion car for...

Question 16

Dan Miller bought a new Toyota truck for $28,000. Dan made a down payment of $6,000 and paid $390 monthly for 70 months. The total finance charge was:

Accepted Answer

The total amount paid for the truck is the down payment plus the total of all monthly payments: $6,000 + ($390 * 70) = $6,000 + $27,300 = $33,300. The total finance charge is the total amount paid minus the original price of the truck: $33,300 - $28,000 = $5,300.

Question 17

Given the following:  The average daily balance is:

Accepted Answer

The answer of Given the following:  The average daily...

Question 18

Given:

Accepted Answer

17.25% - 17.50 % is the correct answer because it is the only option that is within the given range.

Question 19

Which one of the following statements is incorrect?

Accepted Answer

The answer of Which one of the following statements is...

Question 20

Vicki King bought a Ford Explorer for $23,000. Vicki made a down payment of $6,000 and paid $305 monthly for 60 months. What is the total finance charge that Vicki paid at the end of 60 months?

Accepted Answer

($305 × 60)- $17,000 = $1,300.

Quiz 14: Installment Buying