Question 1

Two consumers borrowed $10,000 for 5 years.Bob has a credit score of 650 and has an interest rate of 11.5%,whereas Tyree has a credit score of 710 and has an interest rate of 8.0%.What will be the total difference between what the two men pay?

Accepted Answer

Bob's monthly payment = $235.44Tyree's monthly payment = $182.72Total difference = (235.44 - 182.72) * 12 * 5 = $2,165.40

Question 2

What is the monthly periodic rate on a loan with an APR of 18.6%?

Accepted Answer

The monthly periodic rate is calculated by dividing the annual percentage rate (APR) by 12 months. So, 18.6% divided by 12 equals 1.55%.

Question 3

Dr.Drake is thinking about retirement and decides to sail around the world once he retires.He buys a sailboat for $125,000.He borrows the money at an APR of 7.5% for five years.How much will his total interest be?

Accepted Answer

To calculate the total interest, we first need to find the total amount paid back over the five-year period. Using the formula for compound interest:

A = P(1 + r/n)^(n*t)
where
A = the total amount paid back
P = the principal amount borrowed
r = the annual interest rate (as a decimal)
n = the number of times the interest is compounded per year
t = the number of years

Plugging in the values given:

A = 125,000(1 + 0.075/12)^(12*5)
A = 169,284.40

The total interest paid is then:

Total Interest = A - P
Total Interest = 169,284.40 - 125,000
Total Interest = 44,284.40

Rounding to the nearest cent, the answer is C: $25,284.40.

Question 4

Mantago wants to borrow $10,000 to buy a used car.He examined his budget and decided that he can afford a payment of $200 a month.If his bank offers him an APR of 7.5%,how long should he borrow the money so he can afford his monthly payment?

Accepted Answer

To determine the loan term that allows for a $200 monthly payment at an APR of 7.5%, we can use the loan amortization formula or a loan calculator. Given the principal amount ($10,000), the monthly interest rate (7.5% annual rate divided by 12 months = 0.625% per month), and the monthly payment amount ($200), the calculation will show that a term of approximately 5 years is required to ensure the monthly payments do not exceed $200. This is because the total interest paid over the term of the loan, combined with the principal amount, divided by the number of months in the term, must equal the monthly payment amount. A shorter term would result in higher monthly payments, while a longer term would reduce the monthly payment amount but increase the total interest paid over the life of the loan.

Question 5

The total interest on a 5 year 5.2% loan with a principal of $10,000 is 10,000 $\times$ 0.052 $\times$ 5 = $2,600.

Accepted Answer

The formula provided seems to be an attempt to calculate simple interest, which is Principal * Rate * Time. The correct calculation for a 5-year loan at 5.2% interest on a principal of $10,000 should be $10,000 * 0.052 * 5 = $2,600, which is correct, but the formula notation in the question is unclear and incorrectly formatted.

Question 6

Yanni received her monthly credit card statement in the mail,the summary of which is shown below.When she calculated the new balance for the month,she arrived at a different amount than the credit card company.What should be the correct new balance? ​  ​

Accepted Answer

The previous balance is $3,125.28. Yanni charged $475.00 for the month, making the subtotal $3,600.28. She also made a payment of $200.00 and had a finance charge of $12.00. Subtracting the payment and adding the finance charge gives us a total of $3,412.28. However, the statement shows a new balance of $3,776.28, which is $364.00 more than the calculated total. Therefore, the credit card company must have made an error, and the correct new balance should be $3,412.28 + $364.00 = $3,776.28.

Question 7

Lisa made this spreadsheet to compare her options when she decided to purchase a living room set on an installment plan. ​  ​
What spreadsheet formula should she input into F2?

Accepted Answer

The answer of Lisa made this spreadsheet to compare her...

Question 8

FICO scores range from 300 to about 850.A score above 770 is excellent,a score above 700 is good,and a score below 600 is considered a credit risk.

Accepted Answer

This is an accurate description of the FICO score ranges and their corresponding credit ratings.

Question 9

A debit card is a type of charge card of which the monthly bill must be paid in full.

Accepted Answer

A debit card is linked to your checking account and the money is drawn directly from your account when you make a purchase. There is no monthly bill to be paid in full, as there is with a credit card.

Question 10

The Truth-in-Lending Act protects consumers from harassment from creditors.

Accepted Answer

The Truth-in-Lending Act is designed to protect consumers by requiring clear disclosure of key loan terms and costs, not to protect them from harassment by creditors. Protection from harassment is primarily covered under the Fair Debt Collection Practices Act.

Question 11

Jerry buys a $2,700 motorcycle on a deferred payment plan.There is no down payment and no interest for 18 months.Jerry must make a minimum payment of $75 a month.To avoid a retroactive APR of 21%,he must pay the balance in full before the 18 months has passed.If he pays $75 each month,how much should he pay the last month to avoid the interest charges?

Accepted Answer

Since Jerry needs to pay off the balance in full before the 18 months has passed, he has a total of 18 months to make payments.

Since he pays $75 each month, he will have paid a total of $75 x 18 = $1,350 by the end of 18 months.

To avoid the retroactive APR of 21%, Jerry should pay the balance in full by the end of the 18 months.

Therefore, he should pay a final payment of:

$2,700 (original price) - $1,350 (already paid) = $1,350

So the answer is B) $1,425, which is $1,350 for the remaining balance plus $75 for the final month's minimum payment.

Question 12

Last month,the ending balance on Maryanne's MasterCard was $1,789,the average daily balance was $755,and the monthly periodic rate is 1.85%.Her finance charge can be calculated by multiplying the ending balance times the monthly periodic rate.So the finance charge is $1,789 $\times$ 0.0185 = $33.10.

Accepted Answer

The finance charge should be calculated using the average daily balance, not the ending balance. Therefore, the correct calculation would be $755 * 0.0185 = $13.96.

Question 13

Jackson and Kate Jones do not pay their credit card in full each month,so they incur finance charges.On their last credit card statement,the average daily balance is $875,and the monthly periodic rate is 2.25%.What should be the finance charge on the statement?

Accepted Answer

The finance charge can be calculated by multiplying the average daily balance by the monthly periodic rate: $875 * 2.25% = $19.6875, which rounds to $19.69.

Question 14

Taneeka borrowed $12,000 for a car for 6 years at an APR of 7.25%.Her monthly payment will be $206.03.

Accepted Answer

To check if the monthly payment is correct, we can use the formula for calculating loan payments:

P = (R * A) / (1 - (1 + R) ^ (-N))

where:
P = monthly payment 
R = monthly interest rate (APR divided by 12)
A = loan amount (principal)
N = total number of payments (6 years multiplied by 12 months per year)

Plugging in the values given:

R = 0.0725 / 12 = 0.006042
A = $12,000
N = 6 * 12 = 72

P = (0.006042 * 12,000) / (1 - (1 + 0.006042) ^ (-72))
P = $206.03 (rounded to the nearest cent)

Since the calculated monthly payment matches the given monthly payment, the answer is true.

Question 15

Isabella wants to purchase a new refrigerator.When she applies for an installment loan at the appliance store,her loan application is turned down.What consumer law says that a lender must give her the reason,in writing,that she was denied the loan?

Accepted Answer

The Fair Credit Reporting Act requires that a lender must provide a written notice to a consumer if their loan application is denied based on information obtained from a credit report. This notice must include the reasons for the denial and the credit reporting agency's contact information.

Question 16

Regina pays her credit card balance in full each month.Last month her average daily balance was $345 and the APR is 11.2%.The finance charge on her current month's statement is $13.22.

Accepted Answer

Since Regina pays her credit card balance in full each month, she would not incur a finance charge on her current month's statement, assuming her credit card offers a grace period on purchases, which most credit cards do. The finance charge calculation provided seems to ignore the fact that paying in full typically avoids such charges.

Question 17

Max found a car he wants to buy that costs $16,000.He can afford to pay $250 a month for the car.His bank offers him a car loan of 7.3%.The length of his loan should be about 5 years,so he can afford the payments.

Accepted Answer

The answer of Max found a car he wants to...

Question 18

A FICO score is named after its creator,Fair,Isaac,and Company.It summarizes the probability that a person with debt will repay that debt.

Accepted Answer

The statement accurately describes what a FICO score is and how it is named after its creator, Fair, Isaac, and Company.

Question 19

Use the summary section of the monthly credit card statement below to calculate the finance charge.  ​

Accepted Answer

The answer of Use the summary section of the monthly...

Question 20

Interest can be the money paid by a bank to a consumer as compensation for keeping his or her money in that bank.Interest can also be the money paid to a bank for the use of its money.

Accepted Answer

This statement is true. The two definitions given are accurate descriptions of interest in the context of banking.

Quiz 3: Consumer Credit

Two consumers borrowed $10,000 for 5 years.Bob has a credit score of 650 and has an interest rate of 11.5%,whereas Tyree has a credit score of 710 and has an interest rate of 8.0%.What will be the total difference between what the two men pay?

What is the monthly periodic rate on a loan with an APR of 18.6%?

Dr.Drake is thinking about retirement and decides to sail around the world once he retires.He buys a sailboat for $125,000.He borrows the money at an APR of 7.5% for five years.How much will his total interest be?

Mantago wants to borrow $10,000 to buy a used car.He examined his budget and decided that he can afford a payment of $200 a month.If his bank offers him an APR of 7.5%,how long should he borrow the money so he can afford his monthly payment?

The total interest on a 5 year 5.2% loan with a principal of $10,000 is 10,000 $\times$ 0.052 $\times$ 5 = $2,600.

Yanni received her monthly credit card statement in the mail,the summary of which is shown below.When she calculated the new balance for the month,she arrived at a different amount than the credit card company.What should be the correct new balance?

Lisa made this spreadsheet to compare her options when she decided to purchase a living room set on an installment plan. What spreadsheet formula should she input into F2?

FICO scores range from 300 to about 850.A score above 770 is excellent,a score above 700 is good,and a score below 600 is considered a credit risk.

A debit card is a type of charge card of which the monthly bill must be paid in full.

The Truth-in-Lending Act protects consumers from harassment from creditors.

Last month,the ending balance on Maryanne's MasterCard was $1,789,the average daily balance was $755,and the monthly periodic rate is 1.85%.Her finance charge can be calculated by multiplying the ending balance times the monthly periodic rate.So the finance charge is $1,789 $\times$ 0.0185 = $33.10.

Jackson and Kate Jones do not pay their credit card in full each month,so they incur finance charges.On their last credit card statement,the average daily balance is $875,and the monthly periodic rate is 2.25%.What should be the finance charge on the statement?

Taneeka borrowed $12,000 for a car for 6 years at an APR of 7.25%.Her monthly payment will be $206.03.

Isabella wants to purchase a new refrigerator.When she applies for an installment loan at the appliance store,her loan application is turned down.What consumer law says that a lender must give her the reason,in writing,that she was denied the loan?

Regina pays her credit card balance in full each month.Last month her average daily balance was $345 and the APR is 11.2%.The finance charge on her current month's statement is $13.22.

Max found a car he wants to buy that costs $16,000.He can afford to pay $250 a month for the car.His bank offers him a car loan of 7.3%.The length of his loan should be about 5 years,so he can afford the payments.

A FICO score is named after its creator,Fair,Isaac,and Company.It summarizes the probability that a person with debt will repay that debt.

Use the summary section of the monthly credit card statement below to calculate the finance charge.

Interest can be the money paid by a bank to a consumer as compensation for keeping his or her money in that bank.Interest can also be the money paid to a bank for the use of its money.

Quiz 3: Consumer Credit

Two consumers borrowed $10,000 for 5 years.Bob has a credit score of 650 and has an interest rate of 11.5%,whereas Tyree has a credit score of 710 and has an interest rate of 8.0%.What will be the total difference between what the two men pay?

What is the monthly periodic rate on a loan with an APR of 18.6%?

Dr.Drake is thinking about retirement and decides to sail around the world once he retires.He buys a sailboat for $125,000.He borrows the money at an APR of 7.5% for five years.How much will his total interest be?

Mantago wants to borrow $10,000 to buy a used car.He examined his budget and decided that he can afford a payment of $200 a month.If his bank offers him an APR of 7.5%,how long should he borrow the money so he can afford his monthly payment?

The total interest on a 5 year 5.2% loan with a principal of $10,000 is 10,000 ×\times× 0.052 ×\times× 5 = $2,600.

Yanni received her monthly credit card statement in the mail,the summary of which is shown below.When she calculated the new balance for the month,she arrived at a different amount than the credit card company.What should be the correct new balance? ​ ​

Lisa made this spreadsheet to compare her options when she decided to purchase a living room set on an installment plan. ​ ​ What spreadsheet formula should she input into F2?

FICO scores range from 300 to about 850.A score above 770 is excellent,a score above 700 is good,and a score below 600 is considered a credit risk.

A debit card is a type of charge card of which the monthly bill must be paid in full.

The Truth-in-Lending Act protects consumers from harassment from creditors.

Jackson and Kate Jones do not pay their credit card in full each month,so they incur finance charges.On their last credit card statement,the average daily balance is $875,and the monthly periodic rate is 2.25%.What should be the finance charge on the statement?

Taneeka borrowed $12,000 for a car for 6 years at an APR of 7.25%.Her monthly payment will be $206.03.

Isabella wants to purchase a new refrigerator.When she applies for an installment loan at the appliance store,her loan application is turned down.What consumer law says that a lender must give her the reason,in writing,that she was denied the loan?

Regina pays her credit card balance in full each month.Last month her average daily balance was $345 and the APR is 11.2%.The finance charge on her current month's statement is $13.22.

Max found a car he wants to buy that costs $16,000.He can afford to pay $250 a month for the car.His bank offers him a car loan of 7.3%.The length of his loan should be about 5 years,so he can afford the payments.

A FICO score is named after its creator,Fair,Isaac,and Company.It summarizes the probability that a person with debt will repay that debt.

Use the summary section of the monthly credit card statement below to calculate the finance charge. ​

Interest can be the money paid by a bank to a consumer as compensation for keeping his or her money in that bank.Interest can also be the money paid to a bank for the use of its money.

The total interest on a 5 year 5.2% loan with a principal of $10,000 is 10,000 $\times$ 0.052 $\times$ 5 = $2,600.

Yanni received her monthly credit card statement in the mail,the summary of which is shown below.When she calculated the new balance for the month,she arrived at a different amount than the credit card company.What should be the correct new balance?

Lisa made this spreadsheet to compare her options when she decided to purchase a living room set on an installment plan. What spreadsheet formula should she input into F2?

Use the summary section of the monthly credit card statement below to calculate the finance charge.