Business Math: Ch. 14 Learnsmart

T/F: Revolving charge accounts give consumers closed-ended credit

False (open-ended credit)

Match the installment buying term with its respective equation. 1. Amount Financed 2. Total Deferred Price 3. Total Finance Charge A. Total of All Monthly Payments + Down Payment B. Cash Price - Down Payment C. Total of all monthly payments - Amount Financed

1. = B. 2. = A. 3. = C.

Elizabeth purchased an SUV with a cash price of $28,000 paying $5,000 down. She is to make monthly payments of $488.75 for five years. Match the values to the respective terms. 1. $6,325 2. $23,000 3. $34,325 A. Deferred payment price B. Amount financed C. Total finance charge

1. = C. 2. = B. 3. = A.

Pullman Transport purchased equipment on installment with a cash price of $11,000 paying $1,000 down and agreeing to pay $869.90 per month for one year. What is the total of all monthly payments? A. $10,438.80 B. $438.80 C. $11,438.80 D. $869.90

A. $10,438.80

Find the finance charge with a 12% annual rate (use the monthly rate). Day 1: Previous balance is $1,000. Day 2: Purchase of $20. Day 3: Cash advance of $50. Day 4: Payment of $110. Day 5: Purchase of $35. A. $10.09 B. $121.08 C. $1,009 D. $5,045

A. $10.09

An installment loan is: A. a loan paid off in a series of equal payments B. a loan paid off in a lump sum C. a loan paid off in a series of unequal payments.

A. a loan paid off in a series of equal payments

Alyse was charged $3,657 to borrow $14,000. What is the table lookup factor for finding the APR? A. .2612 B. 26.12 C. .0026

B. 26.12

What is the monthly payment of a $36,500 loan at 8.5% over 36 periods? A. $1,013.89 B. 31.57 C. $1,152.31 D. $1,156.16

C. $1,152.31

The APR table is based on __________ of financing. A. $1 B. $10 C. $100 D. $1,000

C. $100

An act requiring direct main credit card solicitations to include information on all fees, charges and grace periods. A. The Rule of 78 B. Truth in Lending Act C. Fair Credit and Charge Card Disclosure Act

C. Fair Credit and Charge Card Disclosure Act

The amount financed is the: A. cash price B. cash price plus the down payment C. cash price less the down payment

C. cash price less the down payment

The U.S. Rule applies to: A. the number of periods required to pay a loan in half the original time B. the amount of time it takes to double your investment C. early payment of installment loans

C. early payment of installment loans

The purpose of the Truth in Lending Act is to: A. require the consumer to provide full financial disclosure B. regulate interest charges C. make the consumer aware of the true cost of credit

C. make the consumer aware of the true cost of credit

Amortization is the: A. process of paying off an installment loan in a lump sum B. process of paying off an installment loan in a series of equal payments consisting of just interest C. process of paying off an installment loan in a series of equal payments consisting of both principal and interest D. process of paying off an installment loan in a series of equal payments consisting of just principal

C. process of paying off an installment loan in a series of equal payments consisting of both principal and interest

Order the steps for calculating APR by Table method. 1. Identify the number of payments and find the column that corresponds to the table factor. 2. Divide the finance charge by amount financed and multiply by $100. 3. Use the table factor and find the row that corresponds with the number number of payments.

2. 3. 1.

Order the steps for calculating the average daily balance and finance charge. 1. Divide the cumulative daily balance sum by the number of days in the billing cycle. 2. Multiply the average daily balance by the monthly interest rate. 3. Add the cumulative daily balances. 4. Multiply the number of days the daily balance remained the same for more than 1 day. 5. Calculate the daily balance for each day of the billing cycle.

5. 4. 3 1 2

Select the formula for calculating the monthly payment. A. Total of Monthly Payments + Down Payment B. Total of Monthly Payments - Amount Financed C. Cash Price - Down Payment D. (Finance Charge + Amount Financed) / (Number of Payments)

D. (Finance Charge + Amount Financed) / (Number of Payments)

Under the unpaid balance method, interest is charged on the: A. original balance B. average daily balance C. monthly balance D. outstanding balance

D. outstanding balance

Consumers tend to spend _______ when purchasing with a credit card.

more

The largest amount of installment loan interest is charged during the __________ part of the loan.

earlier

The Truth in Lending Act requires creditors to inform customers of the __________ ________ and the annual percentage rate (APR)

finance charge

When paying loan off in installments, the annual percentage rate is (less/greater) _______ than the stated rate.

greater

Purchasing goods on installment substantially ___________ the overall cost of the purchase.

increases