Ch. 10 INSTALLMENT BUYING AND REVOLVING CHARGE CREDIT CARDS

Given the following: 29 Day Billing Cycle 4/17 (Billing Date/Previous Balance): $1,100 4/27 (Payment): $700 4/29 (Charge): $300 5/7 (Payment): $50 The average daily balance is: A. $755.17 B. $910.34 C. $755.71 D. $801.72

$801.72

Ed Sloan bought a new Explorer for $22,000. He put down $7,000 and paid $290 for 60 months. Calculate the deferred payment price of his purchase. A. $24,400 B. $15,000 C. $2,400 D. $17,400

A

John Sullivan bought a used Brunswick boat for $17,000. He made a $2,500 down payment on it. The bank offered him a 7% add-on loan for 60 months. Calculate the APR of the loan (to the nearest hundredth percent). A. $ between 12.25% and 12.50% B. $ between 7.00% and 7.25% C. $ between 19.75% and 20.00% D. $ between 13.75% and 14.00%

A

John Sullivan bought a used Brunswick boat for $17,000. He made a $2,500 down payment on it. The bank offered to finance the balance at 8.4% for 60 months. Calculate his monthly payment. A. $296.79 B. $343.17 C. $347.96 D. $402.33

A

Mia Lane bought a high-definition television for $7,500. Based on her income, she could afford to pay back only $600 per month. There is 1 ½% monthly interest charge on the unpaid balance. The U.S. Rule is used in the calculation. At the end of month 1, the balance outstanding is: A. $7,012.50 B. $7,003.50 C. $6,911.20 D. $6,909.00

A

The average daily balance is equal to the sum of daily balances: A. Divided by number of days in billing cycle B. Plus number of days in billing cycle C. Multiplied by number of days in billing cycle D. Minus number of days in billing cycle

A

Which one of the following statements in incorrect? A. The Truth in Lending Act regulates interest charges B. APR represents the true or effective annual rate of interest C. APR is the true or effective annual interest charged by sellers D. The Truth in Lending Act specifies the information creditors must give buyers

A

John Sullivan bought a used Brunswick boat for $17,000. He made a $2,500 down payment on it. The bank offered him a 7% add-on loan for 60 months. Calculate his monthly payment: A. $336.62 B. $326.25 C. $287.25 D. $382.50

B

John Sullivan bought a used Brunswick boat for $17,000. He made a $2,500 down payment on it. The bank offered to finance the balance at 8.4% for 60 months. Calculate the finance charge on the loan. A. $9,639.80 B. $3,307.40 C. $6,090.20 D. $6,377.60

B

Justin Chan bought a Scion car for a price of $8,200 putting down $800 and financing the remainder with 60 monthly payments of $179.99. The APR is (to the nearest percent): A. 17% B. 16% C. 14% D. 15%

B

The finance charge is equal to the total of all monthly payments: A. Multiplied by amount financed B. Divided by amount financed C. Minus amount financed D. Plus amount financed

C

Amount financed is equal to:

Cash price minus down payment

Dan Miller bought a new Toyota truck for $28,000. Dan made a down payment of $6,000 and paid $390 monthly for 70 months. The total finance charge was: A. $13,300 B. $11,300 C. $27,300 D. $5,300

D

Darlene Ramirez bought a recreational vehicle for $140,000. She put 20% down and financed the balance with a 4.89% loan for 20 years. Her monthly payments are: A. $6,846.07 B. $915.45 C. $5,476.86 D. $732.36

D

When calculating the daily balance, cash advances are: A. Added to the finance charge B. Subtracted from the finance charge C. Subtracted from the previous balance D. Added to the previous balance

D

T/F: The average daily balance is the same as the daily balance

False

T/F: The Truth in Lending Act regulates interest charges

False *purpose is to make the customer aware of the true cost of credit

T/F: The amount financed equals the cash price plus the down payment

False - cash price minus down payment

T/F: The APR represents the stated interest rate

False - represents the true or effective annual interest rate

T/F: Calculating the APR by formula is as accurate as calculating the APR by financial calculator.

False - the formual gives a close approximation of the actual APR, but the financial calculator gives the actual APR

T/F: APR cannot be calculated using a financial calculator.

False *can be calculated through the use of tables, formula and financial calculator

T/F: The Truth in Lending act requires that creditors inform buyers of the finance charge and APR in writing before buyers sign a credit agreement

True

T/F: The U.S Rule can be applied to open-end credit payments

True

T/F: The cost of credit reports would be included in the amount financed.

True

T/F: The daily balance is the previous balance plus cash advances plus purchases minus payments minus credits.

True