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?

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?

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

Chapter5: Making Automobile And Housing Decisions

Section: Chapter Questions

Problem 1FPE

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After visiting several automobile dealerships, Richard selects the used car he wants. He likes its $12,900 price, but financing through the dealer is no bargain. He has $2,500 cash for a down payment, so he needs an $10,400 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 $10,400 for a period of four years at an add-on interest rate of 10 percent. What is the total interest on Richard’s loan? Note: Do not round intermediate calculations. Round your answer to the nearest whole number. What is the total cost of the car? Note: Do not round intermediate calculations. Round your answer to the nearest whole number. What is the monthly payment? Note: Do not round intermediate calculations. Round your answer to the nearest whole number.…
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)?
Some businesses called “car-title lenders” offer quick cash loans in exchange for holding the title to your car as collateral (you lose your car if you fail to pay off the loan). In many states, these lenders operate under pawnbroker laws that allow them to charge a fee that is a percentage of the unpaid balance. Suppose you need $2000 in cash, and a car-title lender offers you a loan at an interest rate of 2% per month plus a monthly fee of 20% of the unpaid balance. How much will you owe in interest and fees on your $2000 loan at the end of the first month? Suppose that you pay only the interest and fees each month. How much will you pay over the course of a full year? Suppose that you instead obtain a loan of $2000 from a bank with a term of 3 years and an APR of 10%. What are your monthly payments in that case? Compare these to the payments to the car-title lender.
Joe bob wants to buy a car and will need to take out a loan in order to make the purchase. His current monthly income is 3,500 per month. His mortgage payment is 900 per month, and his student loan payment is 350 per month according to the affordability formulas given can he afford to take out another loan? when should he follow the affordability formulas? In what case should he not? how could taking out the car loan impact his other priorities? what is the affordability formula I need to use as well
Excited to buy her dream car, Molly rushes into her local Jeep dealership. Molly picks out a car, sits down at the financing desk, and hears the following, “Well we ran your credit history. You’ve got a really thin file just a years worth of student loan payments. The deal you saw was for ‘well- qualified buyers.’ The best deal we can offer you is 6.6% for 60 months. A little more bad news, the cash allowance is also based on credit history, so you don’t qualify for $500. That said, you’re excited about a keep and I want to see you driving one, so I can do $400 for you. How much total interest will Molly pay using this plan? How much will Molly’s monthly payment be using the Bankrate calculator in the screen shot below?
Jackson investigated loans for a $15,575 car. What might happen if he found a car he liked for $10,000 A) he would have larger monthly payments B) the lenders will not lend him a smaller amount of money C) he would still have to take the bank loan offer D) the lender might give him a better interest rate on a smaller loan
You are buying a new car, and you plan to finance your purchase with a loan you will repay over 48 months. The car dealer offers two options: either dealer financing with a low APR, or a $2500 rebate on the purchase price. If you use dealer financing, you will borrow $13,000 at an APR of 3.9%. If you take the rebate, you will reduce the amount you borrow to $10,500, but you will have to go to the local bank for a loan at an APR of 8.87%. To answer the first question below, you may need the following formula, where M is your monthly payment, in dollars, if you borrow P dollars with a term of 48 months at a monthly interest rate of r (as a decimal), and r = APR/12. M = Pr(1 + r)48 (1 + r)48 − 1 Should you take the dealer financing or the rebate? dealer financingrebate How much will you save over the life of the loan by taking the option you chose? (Round your answer to the nearest cent.)$
The Allens are considering buying a house and need to figure out what they can afford and what a bank will lend them. Bill’s annual income is $165,000. Their monthly mortgage payment for the house they want would be $1,650. Their annual property taxes would be $9,000. The home-owner’s insurance premium would cost them $1,100 per year. They have a $550 per month car loan. Their average monthly credit card bill is $4,800. Will the bank lend them the money to purchase the house using the back end ratio with an acceptable range of 36% or less? NO- (53.03%)
A new civil servant is confused about choosing an alternative to procure a motorbike that costs $1287,61, between borrowing money from a bank or credit at a dealer. If the dealer offers a motorbike with a down payment of 5 million and installments of $47,33/ month for 3 years, while the bank offers an interest of 1% / month, A.) it is better for the civil servant to apply for a purchase credit to the dealer or buy cash by borrowing money at the bank (Assume there are no other fees at the bank) bank or credit at a dealer. If the dealer offers a motorbike with a down payment of $348,66 and installments of $47,33/ month for 3 years, while the bank offers an interest of 1% / month
You need to purchase a car, but don’t have the money to buy it outright. Therefore, you’ll have to borrow money for a loan. Your current situation is this:• The car you want to buy costs $11,999• You have $5500 saved for a down payment on the car.• The dealer offers add-on interest loans for 7% per year, for 1, 3, or 5 years.• You want to keep your car payments under $250 per month.(a) Calculate the monthly payments for 1, 3, or 5 years. Can you afford any of these loan terms?Explain.(b) Compute the total interest you’ll pay over the life of each loan
Suppose that you withdraw ₱ 1,500.00 from your savings account. Over the weekend, several people want to borrow money from you. Read the stories and decide to whom you will lend your money. Story 1. Your younger sister is having a garage sale. She needs cash to make a change for the day. She will sell you a bond for ₱ 1,000.00 You will keep the bond for a week, and she promises to pay you back. Story 2. Your older brother has a small business idea but doesn’t have any money. He wants to borrow your ₱ 1,500.00 and promises to pay you back ₱1,800.00 in four weeks. Story 3. Your best friend at school, whom you know very well, wants to borrow your ₱1,500.00 to buy cupcakes. She plans to sell at a higher price and promises to pay you back ₱1,700.00 in two weeks. Whose bonds will you buy? Why? (WITH SOLUTION)
Suppose that you withdraw ₱ 1,500.00 from your savings account. Over the weekend, several people want to borrow money from you. Read the stories and decide to whom you will lend your money. Story 1. Your younger sister is having a garage sale. She needs cash to make a change for the day. She will sell you a bond for ₱ 1,000.00 You will keep the bond for a week, and she promises to pay you back. Story 2. Your older brother has a small business idea but doesn’t have any money. He wants to borrow your ₱ 1,500.00 and promises to pay you back ₱1,800.00 in four weeks. Story 3. Your best friend at school, whom you know very well, wants to borrow your ₱1,500.00 to buy cupcakes. She plans to sell at a higher price and promises to pay you back ₱1,700.00 in two weeks. Whose bonds will you buy? Why?