A store offers two payment plans. Under the installment plan, you pay 25% down and 25% of the purchase price in each of the next 3years. If you pay the entire bill immediately, you can get a discount of 12% on the purchase price. Assume the product sells for $100.a-1. Calculate the present value of the payments if you can borrow or lend funds at an interest rate of 9 percent.Note: Do not round intermediate calculations. Round your answer to 2 decimal places.a-2 Which is a better deal?b-1. Calculate the present value if the payments on the 4-year installment plan do not start for a full year.Note: Do not round intermediate calculations. Round your answer to 2 decimal places.b-2. Which is a better deal?a-1. PV of installment plana-2. Which is a better deal?b-1. PV of installment planb-2. Which is a better deal?

a-1Present value = Cash flow/(1+interest)^number of years that is present value=

Answered: A store offers two payment plans. Under…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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You buy a home for $177,831 and put $11,459 down. You borrow the remainder. The mortgage company also charges a 3% loan and closing fee which you must also borrow. The interest rate is 6.5% for 30 years. Fill in the following to find the total cost of credit. Assume you make the monthly payments for the full number of years. Round to the nearest cent (2 decimal places). Do NOT put $ in your answer. After the down payment, you will need to borrow $ Including the loan and closing fee, the total amount financed will be $ Your monthly payment will be $ You will pay back $ total over the course of the loan. The total cost of credit will be $
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Assume that you have a balance of $4200 on your Discover credit card and that you make no more charges. Assume that Discover charges 25% APR and that each month you make only the minimum payment of 2.2% of the balance. What will the balance be after 10 years? (Enter your answer rounded to the nearest cent.)
Suppose your Visa credit card charges an APR of 13.5%, compounded monthly and your current statement shows a balance of $758.50.a) If you make no payments and no additional purchases for one year, what will bethe amount owed at the end of that year?b) How much total interest will be paid?c) What is the nominal rate?d) What is the effective annual rate (EAR)?e) Suppose this credit card company requires a minimum monthly payment of $25.Assuming that no additional purchases are made and also assuming that this minimum amount is paid every month, prepare an amortization schedule for the first three months of payments.
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You receive a credit card application from Shady Banks Savings and Loan offering an introductory rate of 1.8 percent per year, compounded monthly for the first six months, increasing thereafter to 17 percent compounded monthly. Assuming you transfer the $6,900 balance from your existing credit card and make no subsequent payments, how much interest will you owe at the end of the first year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
COMPARING INTEREST COST. You currently have a credit card that charges 18.99% interest. You receive an offer for a new credit card with a teaser rate of 9.99% for the first 6 month...after that the rate goes up to 24.99%. 14a) What is the total annual interest on the current credit card? 14b) What will be the interest in the first year after you switch? 14C) Should you switch? why?
You wish to buy a $10,900 dining room set. The furniture store offers you a 2-year loan with an APR of 7.2 percent. What are the monthly payments? (Do not round intermediate calculations and round your final answer to 2 decimal places.) How would the payment differ if you paid interest only? (Do not round intermediate calculations and round your final answer to 2 decimal places.)
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