D and 6 please NEL5. Kumal wants to sell her townhouse in Whitehorse. She willspend $2100 updating her home. She has $2100 in cash, butshe plans to buy a $2100 RRSP. She will need 120 d to payoff any loan. Interest is compounded daily.a) Complete the chart.Optionsecuredpersonal loanRRSP loanno loancredit cardDetallic-Buy the RRSP with$2100 cash. Pay forupdating with the loanusing her home equityas collateral.Pay for updatingwith the $2100. Buyan RRSP with anRRSP loan.Pay for updating withthe $2100. Do not getan RRSP.Buy an RRSP with the$2100. Pay for updatingwith a credit card with a30 d grace period.APR2.75%0%1.75% A=2100*(1+1.767/365J*12020.1%Total amountAPI+TA=2100*(1+2.75%./366 (202100A=2(00*(1+20.10%/365)^(120-30b) Which option should Kumal choose? Explain why.c) Which option should Kumal not choose? Explain why.6. What is equity? What is it used for?REFLECTINGKunal Should Choose RRSP loan, it has suppose Kumallow interesthas a loan withsimple interestinstead ofcompound interest.How would thetotal interest bedifferent?209046 2009d) Suppose Kumal uses a RRSP loan instead of her creditcard. How much interest will she save?TotalInterest/A-P19.0710012.12She shouldn't Choose the credit card,the interest is too high.no interest106.67BANKChapter 5 Interest: Borrowing Money112

A loan is a financial arrangement in which one or more people, companies, or other entities lend…

5. Kumal wants to sell her townhouse in Whitehorse. She will spend $2100 updating her home. She has $2100 in cash, but she plans to buy a $2100 RRSP. She will need 120 d to pay off any loan. Interest is compounded daily. a) Complete the chart. Option secured personal loan RRSP loan no loan Gredit card Detalls Buy the RRSP with $2100 cash. Pay for updating with the loan using her home equity as collateral. Pay for updating with the $2100. Buy an RRSP with an RRSP loan. Pay for updating with the $2100. Do not get an RRSP Buy an RRSP with the $2100. Pay for updating with a credit card with a 30 d grace period. APR 2.75% 0% 1.75% A-2100*(1+1.76%./365)*120 20.1% Total amount A-PH+T A=2100*(1+2.75%./360 120 2100 A=2100(1+20.10%./365)^(120-30 b) Which option should Kumal choose? Explain why. Kunal Should choose RRSP Loan, it b low interest c) Which option should Kumal not choose? Explain why. She shouldnt Choose the credi- the interest is too high. What is equity? What is it used for? d) Suppose Kumal uses a RRSP loan instead of her credit card. How much interest will she save?

5. Kumal wants to sell her townhouse in Whitehorse. She will spend $2100 updating her home. She has $2100 in cash, but she plans to buy a $2100 RRSP. She will need 120 d to pay off any loan. Interest is compounded daily. a) Complete the chart. Option secured personal loan RRSP loan no loan Gredit card Detalls Buy the RRSP with $2100 cash. Pay for updating with the loan using her home equity as collateral. Pay for updating with the $2100. Buy an RRSP with an RRSP loan. Pay for updating with the $2100. Do not get an RRSP Buy an RRSP with the $2100. Pay for updating with a credit card with a 30 d grace period. APR 2.75% 0% 1.75% A-2100(1+1.76%./365)120 20.1% Total amount A-PH+T A=2100*(1+2.75%./360 120 2100 A=2100(1+20.10%./365)^(120-30 b) Which option should Kumal choose? Explain why. Kunal Should choose RRSP Loan, it b low interest c) Which option should Kumal not choose? Explain why. She shouldnt Choose the credi- the interest is too high. What is equity? What is it used for? d) Suppose Kumal uses a RRSP loan instead of her credit card. How much interest will she save?

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter7: Using Consumer Loans

Section: Chapter Questions

Problem 8FPE

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Question

D and 6 please

NEL
5. Kumal wants to sell her townhouse in Whitehorse. She will
spend $2100 updating her home. She has $2100 in cash, but
she plans to buy a $2100 RRSP. She will need 120 d to pay
off any loan. Interest is compounded daily.
a) Complete the chart.
Option
secured
personal loan
RRSP loan
no loan
credit card
Detallic-
Buy the RRSP with
$2100 cash. Pay for
updating with the loan
using her home equity
as collateral.
Pay for updating
with the $2100. Buy
an RRSP with an
RRSP loan.
Pay for updating with
the $2100. Do not get
an RRSP.
Buy an RRSP with the
$2100. Pay for updating
with a credit card with a
30 d grace period.
APR
2.75%
0%
1.75% A=2100*(1+1.767/365J*120
20.1%
Total amount
API+T
A=2100*(1+2.75%./366 (20
2100
A=2(00*(1+20.10%/365)^(120-30
b) Which option should Kumal choose? Explain why.
c) Which option should Kumal not choose? Explain why.
6. What is equity? What is it used for?
REFLECTING
Kunal Should Choose RRSP loan, it has suppose Kumal
low interest
has a loan with
simple interest
instead of
compound interest.
How would the
total interest be
different?
209046 2009
d) Suppose Kumal uses a RRSP loan instead of her credit
card. How much interest will she save?
Total
Interest/A-P
19.07
100
12.12
She shouldn't Choose the credit card,
the interest is too high.
no interest
106.67
BANK
Chapter 5 Interest: Borrowing Money
1
12

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