James has been working as a Mechanical Engineer ever since he graduated five years ago. Two years ago, he bought and financed a new $25,000 Jeep Compass and still owes $15,750 on his car loan. He has never been late with a car payment. James has one major credit card, with a $1,000 limit. He has had it since his senior year of college and was two months late with a payment one time during that first year. He is currently carrying a balance of $600 on this card. In the last year, James applied for six store credit cards at places that he shops a lot so that he can earn points and get discounts. He carries no balances Part 1: Calculate James’ credit score. Recalculate his credit score if he had not opened the six store credit cards. Part 2: James is tired of paying rent and would like to purchase a condo so that he can start building equity in his home. He is looking for a 30-year mortgage to purchase a $240,000 condo. What interest rate does James qualify for on a mortgage with his current credit score? What interest rate does he qualify for if he had not opened the new credit cards? Calculate the monthly payment and total interest paid in each of the two situations and compare them. Plot the monthly balances for both mortgages on a single fully formatted plot.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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James has been working as a Mechanical Engineer ever since he graduated five years ago. Two years ago, he bought and financed a new $25,000 Jeep Compass and still owes $15,750 on his car loan. He has never been late with a car payment. James has one major credit card, with a $1,000 limit. He has had it since his senior year of college and was two months late with a payment one time during that first year. He is currently carrying a balance of $600 on this card. In the last year, James applied for six store credit cards at places that he shops a lot so that he can earn points and get discounts. He carries no balances

Part 1:

Calculate James’ credit score.
Recalculate his credit score if he had not opened the six store credit cards.

Part 2:

James is tired of paying rent and would like to purchase a condo so that he can start building equity in his home. He is looking for a 30-year mortgage to purchase a $240,000 condo.

What interest rate does James qualify for on a mortgage with his current credit score?
What interest rate does he qualify for if he had not opened the new credit cards?

Calculate the monthly payment and total interest paid in each of the two situations and compare them. Plot the monthly balances for both mortgages on a single fully formatted plot.

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