Determine the cost of a Payday loan. Homer Simpson had a rough few months. He fell behind on his mortgage and is living paycheck to paycheck. He anticipates another mortgage payment of $3000 coming up very soon at the beginning of April and does not have the liquidity to pay it before his next paycheck on April 5th. He tries a payday loan that is run by Burns Corp on April 1st. The payday loan charges him a fee of $15 for every $100 that he borrows. So he is charged $450 for his $3000 advance on his pay. He pays off his $3000 mortgage on April 2th with the payday loan. He gets paid $3000 on April 5th, but another bill comes up! Bart broke his arm skate boarding and the hospital bill of $3300 is due April 9th. Homer must now delay repayment to the Burns Corp. for the payday loan. They charge him another $450 to delay repayment another pay period (2 weeks). He pays off Bart’s hospital bill with his next paycheck (April 19th), but now his monthly taxes, credit cards and utilities bills, all of which total $3000 are due (April 21rd). He defers the payday loan for another pay period (to May 3th). They charge him another $450 to delay repayment for another 2 weeks. He gets paid and pays his credit card and utility bills, but then Marge has an accident with the family car, and they need to have it fixed! He defers repayment to Burns Corp. for payday loan again. They charge him another $450 to delay repayment. He finally gets his tax return check of $4000 and repays the payday loan. 17a) How much money does he pay to Burns Corp. for the Payday loans? 17b) How much interest would he have paid if he used his credit card with a 25.99% APR instead of a payday loan. (Hint: Remember that APR is given for 12 months or 1 full year).
Determine the cost of a Payday loan. Homer Simpson had a rough few
months. He fell behind on his mortgage and is living paycheck to paycheck.
He anticipates another mortgage payment of $3000 coming up very soon at the
beginning of April and does not have the liquidity to pay it before his next
paycheck on April 5th. He tries a payday loan that is run by Burns Corp on
April 1st. The payday loan charges him a fee of $15 for every $100 that he
borrows. So he is charged $450 for his $3000 advance on his pay. He pays off
his $3000 mortgage on April 2th with the payday loan. He gets paid $3000 on
April 5th, but another bill comes up! Bart broke his arm skate boarding and the
hospital bill of $3300 is due April 9th. Homer must now delay repayment to
the Burns Corp. for the payday loan. They charge him another $450 to delay
repayment another pay period (2 weeks). He pays off Bart’s hospital bill with
his next paycheck (April 19th), but now his monthly taxes, credit cards and
utilities bills, all of which total $3000 are due (April 21rd). He defers the
payday loan for another pay period (to May 3th). They charge him another $450
to delay repayment for another 2 weeks. He gets paid and pays his credit card
and utility bills, but then Marge has an accident with the family car, and they
need to have it fixed! He defers repayment to Burns Corp. for payday loan
again. They charge him another $450 to delay repayment. He finally gets his
tax return check of $4000 and repays the payday loan.
17a) How much money does he pay to Burns Corp. for the Payday loans?
17b) How much interest would he have paid if he used his credit card with a
25.99% APR instead of a payday loan. (Hint: Remember that APR is given for
12 months or 1 full year).
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