Personal Finance (MindTap Course List)
13th Edition
ISBN: 9781337099752
Author: E. Thomas Garman, Raymond Forgue
Publisher: Cengage Learning
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You will usually have choices of interest rates and loan term when seeking a loan. For the following, calculate the monthly payment and total interest over the loan term with each option.You need a $20,000 to buy a used car. Your bank offers a 3 year loan at 5%, a 4 year loan at 6%, and a 5 year loan at 7%.3 year loan at 5%:
Monthly payment: $
Total: $
Total interest: $
4 year loan at 6%:
Monthly payment: $
Total: $
Total interest: $
5 year loan at 7%:
Monthly payment: $
Total: $
Total interest: $
After examining the various personal loan rates available to you, you find that you can borrow funds from a finance company at 9% compounded weekly or from a bank at 10% compounded monthly. Which alternative is more attractive? If you can borrow funds from a finance company at 9% compounded weekly, the EAR for the loan is %
Suppose that you decide to borrow $35,000 for a new car. You can select one of the following loans, each requiring regular monthly payments:
Installment Loan A: three-year loan at 6%
Installment Loan B: five-year loan at 9%.
Find the monthly payments and the total interest for Loan A.
Find the monthly payments and the total interest for Loan B.
Compare the monthly payments and total interest for the two loans.
Use this formula to find the monthly payments:
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- Terri is looking to purchase a used car for $15,000 and received the following auto loan offers. Her goal is to find the option with the lowest monthly payment. Which option should Terri choose to meet her goal? Note you may need to use a financial calculator to answer this question. Select answer from the options below There is not enough information to answer this question. A 60-month loan with a fixed 3.65% interest rate. A 48-month loan with a fixed 2.76% interest rate. A 36-month loan with a fixed 2.72% interest rate.arrow_forwardFinding the time necessary until you pay off a loan is simple if you make equal payments each month. However, when paying off credit cards many individuals only make the minimum monthly payment, which is generally 1% to 2% of the balance or $25 whichever is greater. Locate the credit card calculator at fincalc website and work out this exercise: a) You currently owe $25,000 on a credit card with a 16% interest rate and a minimum payment of $25 or 1% of your balance. b) How soon will you pay off this debt if you make the minimum payment each month? c) How much total interest will you pay using that method? d) Calculate how soon you would pay off this debt if you paid $250 per monthly payment.arrow_forwardWe will now verify your results using an online Amortization Calculator. Return to www.bankrate.com (Links to an external site.), scroll down the home page and select Amortization Calculator (Links to an external site.) under the Mortgages heading. Enter the amount, time, and rate for the original loan to begin with and click CALCULATE. Your monthly payments will appear on the side. Click Show Amortization Schedule to see the month-to-month breakdown of your loan payments over the entire term of the loan.arrow_forward
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- In the Excel Payment Function file that follows, you are looking to see what your basic mortgage payment will be if you buy a home for $250,000. It will be a 30-year mortgage. The interest your bank will charge will be 7.5%. In cell C5, create a function that determines what your monthly payment will be.arrow_forwardSuppose Mary Grace needs to borrow $8,900 for the purchase of a car and is considering two loan options. Loan A is a four-year loan at 7.6% interest while loan B is a seven-year loan at 7.9% interest.Determine the monthly payment required to repay Loan A and the total interest paid over the life of Loan A. Round solutions to the nearest cent, if necessary.The monthly payment for Loan A is $ .The total interest paid for Loan A is $ .Determine the monthly payment required to repay Loan B and the total interest paid over the life of Loan B. Round solutions to the nearest cent, if necessary.The monthly payment for Loan B is $ .The total interest paid for Loan B is $ .Determine the lower-cost option of the two loans. Loan A is the lower-cost option. Loan B is the lower cost option. Determine the amount of savings Mary Grace will experience if she chooses the lower-cost loan option.Savings = $ Hint: Related FormulaThe loan payment formula for fixed installment loans is given by the…arrow_forward(Calculating an EAR) After examining the various personal loan rates available to you, you find that you can borrow funds from a finance company at 12 percent compounded quarterly or from a bank at 13 percent compounded daily. Which alternative is more attractive? If you can borrow funds from a finance company at 12 percent compounded quarterly, the EAR for the loan is entered in your response here -----%. (Round to two decimal places.) If you can borrow funds from a finance company at 13 percent compounded daily, the EAR for the loan is entered in your response here ------%. (Round to two decimal places.) Show excel formula/computation and manualarrow_forward
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