Question 1

The unpaid balance in an account on December 1 was $145. A payment of $60 was made on December 14. The interest rate per month was 1.7% per month of the average daily balance. Find the finance charge for the month of December.

Accepted Answer

To find the average daily balance for the month of December, we need to divide the total balance by the number of days in the month:
Average daily balance = (Total balance - Payment made) / Number of days
= ($145 - $60) / 31
= $2.74
The finance charge for the month can be found by multiplying the average daily balance by the interest rate per month:
Finance charge = Average daily balance x Interest rate per month
= $2.74 x 1.7% = $0.04658
= $1.87 (rounded to the nearest cent)
Therefore, the best choice is (C) $1.87.

Question 2

Find the annual percentage rate using the table.

-Eileen purchased a sofa for $540 and financed it for 17 months. The total finance charge was $85.48. Find the annual percentage rate.

Accepted Answer

The annual percentage rate (APR) can be calculated using the formula for the simple interest rate, which is $I = PRT$, where $I$ is the interest (finance charge), $P$ is the principal amount (initial loan amount), $R$ is the rate of interest per period, and $T$ is the time the money is borrowed for in years. Rearranging the formula to solve for $R$, we get $R = I / (PT)$.Given:- $I = $85.48$- $P = $540$- $T = 17/12$ years (since the finance period is 17 months and there are 12 months in a year)First, calculate the interest rate for the period:$R = 85.48 / (540 * (17/12))$$R ≈ 0.2025$ or 20.25% when converted to a percentage.Therefore, the annual percentage rate is 20.25%.

Question 3

The unpaid balance in an account on November 1 was $125. A payment of $25 was made on November 9. The interest rate per month was 1.65% per month of the average daily balance. Find the finance charge for the month of November.

Accepted Answer

The finance charge can be calculated by first determining the average daily balance. For the first 8 days, the balance was $125, and for the remaining 22 days (assuming November has 30 days), the balance was $100 after the $25 payment. The average daily balance is thus $\frac{(125 \times 8) + (100 \times 22)}{30} = \frac{1000 + 2200}{30} = \frac{3200}{30} = 106.67$. The finance charge is then $106.67 \times 0.0165 = 1.76$, rounding to the nearest cent.

Question 4

The installment price of a watch is $310.74 with 6 monthly payments and a down payment of $30. Find the monthly payment.

Accepted Answer

The total cost after the down payment is $310.74 - $30 = $280.74. Dividing this by 6 monthly payments gives $280.74 / 6 = $46.79 per month.

Question 5

A mountain bike has a cash price of $690.00. Eric purchases the bike by making a down payment of $69.00 and 24 payments of $38.74. Find the finance charge.

Accepted Answer

The total amount paid by Eric is:

Down payment + 24 monthly payments
$69 + (24 x $38.74) = $996.76

To find the finance charge, we need to subtract the cash price of the mountain bike from the total amount paid by Eric:

Total amount paid - Cash price
$996.76 - $690 = $306.76

However, we need to remember that Eric did not pay the full finance charge upfront. Instead, he paid it in smaller amounts over 24 months. This means that the finance charge includes not only the interest, but also any fees or charges associated with the financing. To find the finance charge per month, we can divide the total finance charge by the number of months of the loan:

Finance charge per month = Total finance charge / Number of months
$306.76 / 24 = $12.78

Therefore, the finance charge is $12.78 per month or $308.76 for the entire loan period. The closest answer choice to this amount is D ($308.76).

Question 6

The unpaid balance in an account at the beginning of December was $176. A payment of $55 was made on December 23. The interest rate per month was 1.6% per month of the average daily balance. Find the new balance at the end of December.

Accepted Answer

The average daily balance is (176 + 121) / 2 = 148.5. The interest for December is 148.5 * 0.016 = 2.38. The new balance is 176 + 2.38 - 55 = 123.56.

Question 7

The March 1 unpaid balance in an account was $229. On March 5, a payment of $80 was made. The interest rate per month was 1.7% per month of the average daily balance. Find the new balance at the end of March.

Accepted Answer

The average daily balance is (229 + 149) / 2 = 189. The interest for March is 189 * 0.017 = 3.21. The new balance is 149 + 3.21 = 151.71.

Question 8

Chaundra has a credit card with a monthly rate of 1.3% .The account applies the unpaid balance method. Her unpaid balance for the June billing cycle is $704.42. During the month of June, she made purchases of $452.61, returned items worth $17.69 and made a payment of $105. Find her new balance.

Accepted Answer

The new balance is calculated by first adding the interest to the unpaid balance, then adding new purchases, subtracting returns, and subtracting any payments made. Interest for the month is 1.3% of $704.42, which is $9.16. So, the calculation is $704.42 (unpaid balance) + $9.16 (interest) + $452.61 (purchases) - $17.69 (returns) - $105 (payment) = $1043.50.

Question 9

What is the monthly interest rate if an annual rate is 17.5%?

Accepted Answer

To calculate the monthly interest rate, divide the annual rate by 12 (the number of months in a year):
17.5% / 12 = 1.4583%
Round off to two decimal places, the monthly interest rate is 1.46%. Therefore, the correct answer is A.

Question 10

On April 1, the unpaid balance in an account was $174. A payment of $70 was made on April 8. On April 26 a $26 purchase was made. The interest rate per month was 1.75% per month of the average daily balance. Find the new balance at the end of April.

Accepted Answer

The average daily balance is (174 x 8 + 104 x 18) / 26 = 135. The interest is 135 x 0.0175 x 26 / 365 = 2.06. The new balance is 174 + 26 - 70 + 2.06 = 132.18.

Question 11

Susan has a credit card with a monthly rate of 1.4%. The account applies the unpaid balance method. The unpaid balance for her Apr billing cycle is $415.20. During the billing cycle she made purchases of $189.36 returned items for $17.08, and made a payment of $60.00. Find the new balance.

Accepted Answer

First, we need to calculate the finance charge for the month:
Finance charge = unpaid balance * monthly rate
Finance charge = $415.20 * 0.014
Finance charge = $5.81

Next, we need to calculate the total activity on the account:
Total activity = purchases - returns + payments
Total activity = $189.36 - $17.08 + $60.00
Total activity = $232.28

Now we can calculate the new balance:
New balance = unpaid balance + finance charge + total activity
New balance = $415.20 + $5.81 + $232.28
New balance = $653.29

Therefore the best choice is (C) $533.29.

Question 12

On October 1, the unpaid balance in an account was $185. No payments were made that month. The interest rate per month was 1.75% per month of the average daily balance. Find the finance charge for the month of October.

Accepted Answer

The answer of On October 1, the unpaid balance in...

Question 13

Find the installment price of a laptop computer bought on the installment plan with $90 down and 36 payments of $33.05.

Accepted Answer

The installment price is calculated by adding the down payment to the total of all the payments made. So, $90 down payment + (36 payments * $33.05 per payment) = $90 + $1189.80 = $1279.80.

Quiz 12: Consumer Credit