Personal Finance Chapter 7 HW Part II

The pros and cons of T&E credit cards, such as American Express, include:

A Travel & Entertainment card requires full payment of the balance due each month but does not impose a finance charge. Annual charge can be high.

What are the key pieces of information that credit card issuers must provide are:

APRs, grace period, variable rate information and Annual fees.

Credit offered by car dealers, such as financing through -----, may be less expensive than banks but the downside is the the car dealer may be less willing to discount the price.

General Motors Acceptance Corporation and Ford Motor Credit Corporation

Cash advances on credit cards usually accrue --- from the moment you accept the cash.

Interest

Looking for credit, aided by Internet searches, is just as important as comparison ---- for large purchases such as automobile, furniture or major appliances.

Shopping

if you cannot make a payment on a debt when due, contact the ---- at once to work out a modified payment plan

creditor

A car is repossessed by a bank. The borrower owed $4,000 on he car, At an auction, the car is sold for $3,000 and the bank incurred at $150 towing charge. How much, if anything, will the borrower owe after the sale at auction?

$1,150, which the unpaid loan balance and the towing charge.

What would be the interest cost (simple interest) for a $2,000 loan with a 6% interest for half a year?

$2,000 ×0.06×0.5 =$60

On a discount loan of $2,000 with $75 interest, how much will you receive for loan proceeds

$2000 - $75 = $1925

Most automobile financing agreements permit your creditor to ---- your car anytime you are in default on your payments.

repossess

question 6

Sets a consistent due date for card payments each month. If the due date falls on a holiday or weekend, the deadline is considered the next business day. - Restricts the penalties that card issuers can charge for going over the credit limit. - Prohibits card issuers from issuing cards to consumers under 21 unless they have a cosigner or can demonstrate that they have independent means to repay the card debt.

The new Credit CARD Act requires creditors to include a warning on the monthly statement about making only the minimum ----

Payment

TRUE OR FALSE The Fair Debt Collection Practices Act (FDCPA) prohibits certain practices that agencies collect debts for creditors.

True

TRUE OR FALSE The rule of 78ths (sum of the digits) is mathematical formula to determine how much interest has been paid at any point in a loan

True

What are the three types of credit insurance are:

- Credit accident and health - Credit life - Credit property

Each 1% increase in the ---- rate means a decrease of approximately 1% in the quality of goods and service you can purchase with a given amount of money.

inflation

The major provisions of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 does what?

- Limits card issuers' ability to increase the APR on transferred balances during the first year that the account is opened. - Restricts card issuers from applying new (higher) interest rates to the existing card balances. - Requires companies to inform consumers of rate increases or other significant changes at least 45 days in advance. - States that teaser rates must stay in effect for at least 6 months. - Requires issuers to mail monthly statements at least 21 days before payment is due. - Makes new disclosure statements clear and more timely.

The top reasons why consumers can't pay debts when due are:

1) Emotional problems, 2) Use of money to punish, 3) Expectation of instant comfort, 4) Keeping up with the Joneses, 5) Overindulgence of children, 6) Misunderstanding or lack of communication among family members, 7) Amount of finance charges.

question 6

Mandates that monthly credit card statements must prominently display the due date and potential late fees, as well as the interest you have paid during the current year and the monthly payment required to pay off the existing balance. - Statements must also warn consumers about the costs of making only the minimum payments. - Requires credit card issuers to post their standard card agreements on the Internet.

A $1000 loan that uses add-on interest has the following terms: 8%, one year, two payments: one in 6 months and one in 12 months. What is the amount of each of these payments?

Payment 1: $1000 × 0.08 × 0.5 = 40 --> ($1000 + $40 = $1040) Payment 2: 500 × 0.08 × 1 = 40 ---> ($500 + $40 = $540)

A simple interest declining balance loan gas the following terms: 8% annual interest rate, $2,000 loan, 2 payments: one at the end of the first half year and the last payment at the end of the second half year, what would be the amount of these two payments?

Payment 1: $2,000 × 0.08 × 0.5 = $80 ---> $1000 + $80 = $1080 Payment 2: $1000 × 0.08 x 0.5 = $40 ---> $1000 + $40 = $1040

A simple interest declining balance loan gas the following terms: 8% annual interest rate, $3,000 loan, 2 payments: one at the end of the first half year and the last payment at the end of the second half year, what would be the amount of these two payments?

Payment 1: $3,000 × 0.08 × 0.5 = $120 ---> $1500 + $120 = $1620 Payment 2: $1500 × 0.08 x 0.5 = $60 ---> $1500 + $60 = $1560