Consider the following flyer that you just received. "We have good news, Eric Moon! Your credit history allows us to offer you a guaranteed check of $2,009.06. That's right-a preapproved loan just in time to help with your vacation! It's easy. Just endorse the attached loan check and deposit it in your bank account. Your payment schedule will be 18 equal monthly payments of $150 each, beginning 30 days after your depositing the check in your bank account." a) Suppose you have a credit card. Your credit company charges an annual percentage rate (APR) of 24.99% for cash advances. Determine the APR and effective interest rate of this loan solicitation. Is it better by doing a cash advance in the amount of $2,009.06 on your credit? Answer it by comparing the cash advance option and the loan solicitation option. b) Suppose that you decided to go with a cash advance by making $50 monthly payment until you pay off the loan. What would be the total finance (interest) charge (dollar amount the credit will cost you) for each option? The total finance charge can be calculated by subtracting the amount of money borrowed ($2,009.06) from the total payments.

Consider the following flyer that you just received. "We have good news, Eric Moon! Your credit history allows us to offer you a guaranteed check of $2,009.06. That's right-a preapproved loan just in time to help with your vacation! It's easy. Just endorse the attached loan check and deposit it in your bank account. Your payment schedule will be 18 equal monthly payments of $150 each, beginning 30 days after your depositing the check in your bank account." a) Suppose you have a credit card. Your credit company charges an annual percentage rate (APR) of 24.99% for cash advances. Determine the APR and effective interest rate of this loan solicitation. Is it better by doing a cash advance in the amount of $2,009.06 on your credit? Answer it by comparing the cash advance option and the loan solicitation option. b) Suppose that you decided to go with a cash advance by making $50 monthly payment until you pay off the loan. What would be the total finance (interest) charge (dollar amount the credit will cost you) for each option? The total finance charge can be calculated by subtracting the amount of money borrowed ($2,009.06) from the total payments.

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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