CONSOLIDATING LOANS Roberto and Julie Hernandez are struggling to make their monthly payments. They have accumulated too much debt, which was easy to do with two young kids at home. Julie works 30 hours a week and takes care of the kids after day care. Their credit history was poor, result- ing in high interest rates on loans. However, a few months ago Roberto added a second job, and they have been making payments regularly for 5 months. 1. Find the monthly payments on each of the following purchases and the total monthly payment. Purchase Honda Accord Ford truck Home 2nd mortgage on home Original Loan Amount $18,800 12% $14,300 18% $126,800 6% $4,500 12% Interest Term of Loan Rate 4 years 4 years 15 years 3 years Total Monthly Payment
CONSOLIDATING LOANS Roberto and Julie Hernandez are struggling to make their monthly payments. They have accumulated too much debt, which was easy to do with two young kids at home. Julie works 30 hours a week and takes care of the kids after day care. Their credit history was poor, result- ing in high interest rates on loans. However, a few months ago Roberto added a second job, and they have been making payments regularly for 5 months. 1. Find the monthly payments on each of the following purchases and the total monthly payment. Purchase Honda Accord Ford truck Home 2nd mortgage on home Original Loan Amount $18,800 12% $14,300 18% $126,800 6% $4,500 12% Interest Term of Loan Rate 4 years 4 years 15 years 3 years Total Monthly Payment
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Transcribed Image Text:CONSOLIDATING
LOANS
Roberto and Julie Hernandez are struggling to make their monthly payments. They have
accumulated too much debt, which was easy to do with two young kids at home. Julie works
30 hours a week and takes care of the kids after day care. Their credit history was poor, result-
ing in high interest rates on loans. However, a few months ago Roberto added a second job, and
they have been making payments regularly for 5 months.
1. Find the monthly payments on each of the following purchases and the total monthly
payment.
Purchase
Honda Accord
Ford truck
Home
2nd mortgage
on home
Original
Loan
Amount
$18,800
$14,300
$126,800
Interest Term of
Rate Loan
12%
18%
61%
$4,500 12%
Item
Honda Accord
Ford truck
Home
2nd mortgage on
home
Expense
Payments on debt from 1. above
Car insurance
Health insurance
Real estate taxes and
insurance on home
2. These monthly expenses do not include car insurance ($215 per month), health insurance
($290 per month), or real estate taxes and insurance on their home ($3350 per year),
among other expenses. Find their total monthly outlay for all of these expenses.
Car insurance
Health insurance
Real estate taxes and insurance on home
Total
4 years
4 years.
15 years
Current
Loan
Amount
3 years.
Total
3. A loan officer told them that they can (1) refinance the remaining $14,900 amount on the
Honda Accord at 12% over 4 years, (2) refinance the remaining $8600 loan amount on the
Ford truck at 12% over 3 years, (3) refinance the remaining $121,850 loan amount on their
home at 5% over 30 years, and (4) reduce their car insurance payments by $28 per month.
Complete the following table.
4. Find the reduction in their monthly payments.
Monthly
Payment
Monthly
Outlay
New
Interest
Rate
502 CHAPTER 12 Business and Consumer Loans
New
Term of
Loan
New
Monthly
Payment
Part of the savings in the monthly payment came from reducing the interest rates. The
remainder of the savings came from extending the loans further into the future, meaning
that the Hernandez family will, in the long run, pay more interest. But at least their current
bills are reduced by $715.11 per month. Their goal now is to avoid new debt and pay off
some of the existing debt.
INVESTIGATE
The interest rate that you are charged for borrowing money differs depending on the bank
you go to for a loan. Find current interest rates for financing a 2-year-old Toyota Camry
from at least two banks in the area in which you live. Then go online and look for a lower
interest rate.
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