Comparing payments and APRs of financing alternatives. Because of a job change, Finn McBryde has just relocated to the southeastern United States. He sold his furniture before he moved, so he’s now shopping for new furnishings. At a local furniture store, he’s found an assortment of couches, chairs, tables, and beds that he thinks would look great in his new two-bedroom apartment; the total cost for everything is $6,400. Because of moving costs, Ben is a bit short of cash right now, so he’s decided to take out an installment loan for $6,400 to pay for the furniture. The furniture store offers to lend him the money for 48 months at an add-on interest rate of 6.5 percent. The credit union at Finn’s firm also offers to lend him the money—they’ll give him the loan at an interest rate of 6 percent simple, but only for a term of 24 months. Compute the monthly payments for both of the loan offers. Show your work. Determine the APR for both loans. Which is more important: low payments or a low APR? Explain.
Comparing payments and APRs of financing alternatives. Because of a job change, Finn McBryde has just relocated to the southeastern United States. He sold his furniture before he moved, so he’s now shopping for new furnishings. At a local furniture store, he’s found an assortment of couches, chairs, tables, and beds that he thinks would look great in his new two-bedroom apartment; the total cost for everything is $6,400. Because of moving costs, Ben is a bit short of cash right now, so he’s decided to take out an installment loan for $6,400 to pay for the furniture. The furniture store offers to lend him the money for 48 months at an add-on interest rate of 6.5 percent. The credit union at Finn’s firm also offers to lend him the money—they’ll give him the loan at an interest rate of 6 percent simple, but only for a term of 24 months. Compute the monthly payments for both of the loan offers. Show your work. Determine the APR for both loans. Which is more important: low payments or a low APR? Explain.
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:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Chapter7: Using Consumer Loans
Section: Chapter Questions
Problem 10FPE
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- Comparing payments and APRs of financing alternatives. Because of a job change, Finn McBryde has just relocated to the southeastern United States. He sold his furniture before he moved, so he’s now shopping for new furnishings. At a local furniture store, he’s found an assortment of couches, chairs, tables, and beds that he thinks would look great in his new two-bedroom apartment; the total cost for everything is $6,400.
Because of moving costs, Ben is a bit short of cash right now, so he’s decided to take out an installment loan for $6,400 to pay for the furniture. The furniture store offers to lend him the money for 48 months at an add-on interest rate of 6.5 percent. The credit union at Finn’s firm also offers to lend him the money—they’ll give him the loan at an interest rate of 6 percent simple, but only for a term of 24 months.
- Compute the monthly payments for both of the loan offers. Show your work.
- Determine the APR for both loans.
- Which is more important: low payments or a low APR? Explain.
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