Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN: 9780357033609
Author: Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 7, Problem 8FPE
a.
Summary Introduction
To calculate: The monthly mortgage payment.
b.
Summary Introduction
To calculate: Total interest paid over full life of the loan.
c.
Summary Introduction
To find out the Annual Percentage Rate of the loan
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
After careful comparison shopping, Noah Griffin decides to buy a new Toyota Camry. With some options added, the car has a price of $23,610 - including plates and taxes. Because he can't afford to pay cash for the car, he will use some savings and his old car as a trade-in to put down $7,610. Noah plans to finance the rest with a $16,000, 60-month loan at a simple interest rate of 5 percent.
What will his monthly payments be? Round the answer to the nearest cent.
$ per month
How much total interest will Noah pay in the first year of the loan? Round the answer to the nearest cent. (Use a monthly payment analysis procedure similar to the one in Exhibit 7.7.)
$
How much interest will Noah pay over the full (60-month) life of the loan? Round the answer to the nearest cent.
$
What is the APR on this loan? Round the answer to 2 decimal places.
%
Ginny, who lives in Houston, is trying to decide between the following car models:
Brand and Model
Chevy Sonic
Toyota Camry
Ford Escape Hybrid
Dodge 1500 Pickup
Cost
$14,255
17,950
30,570
37,590
She's currently accumulated a down payment of $5,000 and she has determined that she can afford maximum payments of $375 per month. Her
initial research on the current cost of auto loans has found that her lowest cost loan would be made by a bank and would require an interest rate of
6% for five years.
Given this information, the maximum amount that Ginny can afford to pay for her new car is
can afford to purchase, without stretching her budget, is:
OOO
The Chevy Sonic
The Toyota Camry
The Dodge 1500 Pickup
The Ford Escape Hybrid
I
and the most expensive car that she
After visiting several automobile dealerships, Richard selects the used car he wants. He likes its $10,000 price, but financing through
the dealer is no bargain. He has $1,500 cash for a down payment, so he needs an $8,500 loan. In shopping at several banks for an
installment loan, he learns that interest on most automobile loans is quoted at add-on rates. That is, during the life of the loan, interest
is paid on the full amount borrowed even though a portion of the principal has been paid back. Richard borrows $8,500 for a period of
four years at an add-on interest rate of 10 percent.
(a) What is the total interest on Richard's loan? (Do not round intermediate calculations. Round your answer to the nearest whole
number.)
Total interest
(b) What is the total cost of the car? (Do not round intermediate calculations. Round your answer to the nearest whole number.)
Total cost
(c) What is the monthly payment? (Do not round intermediate calculations. Round your answer to the nearest whole…
Chapter 7 Solutions
Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- After visiting several automobile dealerships, Richard selects the car he wants. He likes its $10,500 price, but financing through the dealer is no bargain. He has $2,100 cash for a down payment, so he needs an $8,400 loan. In shopping at several banks for an installment loan, he learns that interest on most automobile loans is quoted at add-on rates. That is, during the life of the loan, interest is paid on the full amount borrowed even though a portion of the principal has been paid back. Richard borrows $8,400 for a period of two years at an add-on interest rate of 10 percent. a) What is the total interest on Richard’s loan? b) What is the total cost of the car? c) What is the monthly payment? d) What is the annual percentage rate (APR)?arrow_forwardI’m confusedarrow_forwardAfter visiting several automobile dealerships, Richard selects the car he wants. He likes its $15,000 price, but financing through the dealer is no bargain. He has $3,000 cash for a down payment, so he needs a loan of $12,000. In shopping at several banks for an installment loan, he learns that interest on most automobile loans is quoted at add-on rates. That is, during the life of the loan, interest is paid on the full amount borrowed even though a portion of the principal has been paid back. Richard borrows $12,000 for a period of four years at an add-on interest rate of 14 percent. a. What is the total interest on Richard's loan? Total interest b. What is the total cost of the car? Total cost c. What is the monthly payment? Monthly payment d. What is the annual percentage rate (APR)? (Enter your answer as a percent rounded to 2 decimal places.) APR %arrow_forward
- You are planning to buy an used car from a local dealer. The list price of the car is $12,000. If you pay cash, the cost of car is $11,000. The dealer also offers you the choice of paying $5,500 down with 3 equal year-end payment of $2,100. You have $5,500 cash. If you prefer, you can borrow the rest from your bank with a personal loan of 10% interest rate. What is the dealer's implied interest rate? Do you accept the dealer credit sale or borrow from the bank? List price of car Downpayment Cash cost of car Bank rate of interest Year 0 1 2 3 12,000 5,500 11,000 10% Payment in cash -11,000 0 0 0 Payment with credit -5,500 -2,100 -2,100 -2,100 Cash spent or saved with credit plan 5,500 -2,100 -2,100 -2,100arrow_forward1. Rayleene is getting a loan to buy a used car from a seller on Kijiji. The price of the car is $9200.00. She has a down payment of $500.00 and is able to negotiate an interest rate of 4.5% from her bank. Rayleene is trying to decide whether to get her loan for 3 or 4 years. a. Use an online personal loan calculator to fill in the following table to help her decide: Amount of Principal Interest Rate Length of Loan 3 year loan 4 year loan Monthly Payment Total Payments (Monthly Payment x # of months) Total Cost of the Loan (Total Payments – Principal) b. Should Rayleene take her car loan out for 3 or 4 years? Why?arrow_forwardRead the passage and answer the following question(s). dis ins Homeowner and Renters Insurance: Protect Your Belongings You may be able to save hundreds of dollars a year on homeowners insurance by shopping around. You can also save money with these tips: Consider a higher deductible. Increasing your deductible by just a few hundred dollars can make a big difference in your premium. Ask your insurance agent about discourks. You may be able to get a lower premium if your home has safety features such as dead-bolt locks, smoke detectors, an alarm system, storm shutters or fire retardant roofing material. Persons over 55 years of age or long-term customers may also be offered discounts. OD. Insure your house NOT the land under it. After a disaster, the land is still there. If you don't subtract the value of the land when deciding how much homeowners insurance to buy, you will pay more than you should. Don't wait till vou have lorarrow_forward
- You want to buy a used car but don't have enough money to purchase it outright. Your parents suggest that you check around at local banks, credit unions, and savings and loans to compare the interest rate on a 36-month $2,000 loan for an older used car. 1. What is the lowest interest rate that is being charged to borrow money for a used car at a bank, credit union, and savings and loan? Include the interest rate and the name of the institution offering the loan. 2. Of the three options, which location has the lowest interest rate for a loan? Is this surprising given what you learned about these types of institutions? Why or why not?arrow_forwardYou want to buy a used car but don't have enough money to purchase it outright. Your parents suggest that you check around at local banks, credit unions, and savings and loans to compare the interest rate on a 36-month $2,000 loan for an older used car. Please Answer the following questions: 1. What is the lowest interest rate that is being charged to borrow money for a used car at a bank, credit union, and savings and loan? Include the interest rate and the name of the institution offering the loan. 2. Of the three options(local banks, credit unions, and savings and loans), which location has the lowest interest rate for a loan?arrow_forwardREFLECTING Should Jill consider a payday loan to purchase the refrigerator? Explain. Hint APR means annual percent rate. 2. Jill is buying a new refrigerator. She cannot afford to pay cash. Should she use a credit card or get a personal loan? Justify your answer. 3. Liam, a taxi driver in Revelstoke, wants to buy a new taxi. He was approved for the loans in this chart. a) What should Liam think about when he chooses a loan? should Choose the Lost Fixed APR payments for 4 Apprenticeship and Workplace 11 secured personal 5.5% loan auto loan 7.5% b) Which loan should Liam choose? Explain why. 4 yr 6 yr 4. Hannah says that using payday loans and cash advances on credit cards are bad choices for borrowing money. Do you agree or disagree? Explain. NELarrow_forward
- Yuli plans to purchase a vehicle, and she is working with two bank offers. . Bank One Loan Offer: $73,800, 6% annual interest, 60 months. . Bank Two Loan Offer: $73,800, 3% annual interest, 84 months. Yuli's ultimate financial goal is to select the loan with the lowest monthly payment regardless of duration. Based on her financial goal, which loan will Yuli choose? O A. Bank One: Loan Offer O B. Bank Two: Loan Offer OC. Both monthly payments are the same. O D. Not enough information given to answer the question.arrow_forwardCan Olivia and Anthony Afford This Home Using the Monthly Income Loan Criterion? Next week, your friends Olivia and Anthony want to apply to the Fourth Global Bank for a mortgage loan. They are considering the purchase of a home that is expected to cost $125,000. Given your knowledge of personal finance, they’ve asked for your help in completing the Home Affordability Worksheet that follows. (Note: When completing the form, round each dollar amount to the nearest whole dollar.) To assist in the preparation of the worksheet, Olivia and Anthony also collected the following information: • Their financial records report a combined gross before-tax annual income of $125,000 and current (premortgage) installment loan, credit card, and car loan debt of $1,823 per month. • Their property taxes and homeowner’s insurance policy are expected to cost $3,125 per year. • Their best estimate of the interest rate on their mortgage is 7.5%, and they are interested in obtaining a 15-year loan.…arrow_forwardPlanning a new car purchase . Olivia Green has just graduated from college and needs to buy a car to commute to work. She estimates that she can afford to pay about $450 per month for a loan or lease and has about $2,000 in savings to use for a down payment . Develop a plan to guide her through her first car -buying experience , including researching car type , deciding whether to buy a new or used car , negotiating the price and terms , and financing the transactionarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Pfin (with Mindtap, 1 Term Printed Access Card) (...FinanceISBN:9780357033609Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning
Pfin (with Mindtap, 1 Term Printed Access Card) (...
Finance
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Cengage Learning