Unit 2 Test 96%

Jenny used her credit card to buy a refrigerator with a base cost of $824. The refrigerator consumed an average of $0.09 in electricity every day. Jenny made regular monthly payments for three and a half years, at which point the refrigerator was paid off. Over the eight years that Jenny had the refrigerator, it needed repairs three times, costing $68.75 each time. If Jenny's credit card has an APR of 10.54%, compounded monthly, and sales tax in Jenny's area is 7.13%, what was the lifetime cost of Jenny's refrigerator? Assume that Jenny made no other purchases with her credit card, and round all dollar values to the nearest cent. (Remember that leap year occurs every four years.) a. $1,528.47 b. $1,622.46 c. $1,779.63 d. $1,457.91

a. $1,528.47

Looking for some furniture for her new apartment, Susan visits the local swap meet in search of something cheap. Knowing that most swap meet vendors will not accept credit cards and that she will not have any money until her next payday, Susan decides to take out a $200 cash advance on her credit card at an interest rate of 32%. If Susan had no previous balance on her credit card, and she manages to pay off the balance within 1 month, how much will she have to pay in interest? a. $5.33 b. $32.00 c. $173.33 d. $205.33

a. $5.33

Miles and Nick each separately apply for and receive loans worth $5,000 apiece. Miles has a very good credit score, so his loan has an APR of 7.75%, compounded monthly. Nick's credit score is rather low, so his loan has an APR of 13.10% interest, compounded monthly. If both of them repay their loans over a four year period, making equal monthly payments based on their own loan, how much more will Nick have paid than Miles? (Round all dollar values to the nearest cent.) a. $619.68 b. $267.50 c. $1,609.57 d. $1,070.00

a. $619.68

Fran is going to transfer her credit card balance over to a new card. She has an existing balance of $752.69. Her current card charges her a transfer fee of 12.5%, added to her balance, for transferring her debt. The new card has an opening fee of $50, which is also added to her balance. She will also have to make an immediate minimum payment, which is 3.35% of her total balance. How much will her balance be after she makes this payment, assuming that she pays the minimum amount? Round all dollar values to the nearest cent. a. $866.74 b. $868.40 c. $818.41 d. $926.82

a. $866.74

Robert is looking to buy a deep fryer. He has narrowed his search down to two models. The following table gives the details of the prices, cost per use in electricity and oil, and lifespan of the two models Robert is considering to purchase. Robert plans on using his deep fryer about eight times per month. After six years, which brand will have the lower lifetime cost, and by how much? Hint: Assume that either deep fryer can be repurchased at the same price, if needed to provide the desired length of service. a. Brand P will be $118.26 cheaper than Brand Q. b. Brand P will be $149.76 cheaper than Brand Q. c. Brand Q will be $184.50 cheaper than Brand P. d. Brand Q will be $31.50 cheaper than Brand P.

a. Brand P will be $118.26 cheaper than Brand Q.

Of the following statements, which one or ones describe actions harmful to your credit score? I. Owing a lot of money II. Having many lines of credit III. Making steady payments a. I and II b. II only c. I and III d. I only

a. I and II

How is the daily balance method different from compounding interest daily? a. Unlike daily compound interest, the daily balance method only applies charges at the end of the month. b. The daily balance method rounds less frequently than daily compound interest. c. The daily balance method checks your balance at the end of each day, but daily compound interest checks at the beginning of each day. d. It is not different. The two processes are the same.

a. Unlike daily compound interest, the daily balance method only applies charges at the end of the month.

Ralph is purchasing a new gaming system for $300.00. He is trying to decide whether he wants to use cash or his credit card to pay. He has $600.00 available in his checking account. Which of the following is not an argument that justifies Ralph's use of his cash to purchase the gaming system? a. Using cash can help Ralph improve his credit score. b. Using cash may limit overspending or impulse buying. c. Cash doesn't come with any potential "over limit" or "late payment" fees. d. Cash will be the easiest method of payment with very few security measures involved.

a. Using cash can help Ralph improve his credit score.

Dennis has a credit card with an APR of 10.14% and a billing cycle of 30 days. The following table shows his transactions with that credit card in the month of November. If the finance charge for November is $3.82, which method of calculating the finance charge does Dennis's credit card company use? a. adjusted balance method b. previous balance method c. daily balance method d. there is not enough information to determine which method was used

a. adjusted balance method

Jessica's credit card is on a 30-day billing cycle, and it computes finance charges using the adjusted balance method. The following table details Jessica's use of her credit card in the month of October. What is Jessica's adjusted balance for October? a. $1,136.71 b. $1,033.76 c. $1,140.55 d. $1,240.55

b. $1,033.76

Sam is getting ready for a big date when he realizes that he has no money. His roommate, Bill, also has no money, but he has a credit card. Knowing that nobody will let Sam use Bill's credit card, Sam asks Bill to pull out a cash advance for $120.00. Bill agrees under the condition that Sam is responsible for all interest that accrues on the cash advance which is a 30% interest rate, compounded monthly. The $120 cash advance is repaid in monthly installments over 5 years. How much should Bill ask Sam to pay in interest for the cash advance? a. $3.88 b. $112.80 c. $120.00 d. $232.80

b. $112.80

Pam has just moved into a new home and wants to purchase an oven. She expects to live in this house for the foreseeable future. She has narrowed her choices down to two options. Consider the following table, which describes the prices, daily electricity costs, and lifespans of the two ovens she is considering: Which brand will have the lower lifetime cost, and how much lower will it be? Hints: If the product's expected lifespans differ, assume that repurchase(s) at the same price is possible to equalize the lifespans. Remember that six of the twenty-four years will be leap years, and round all dollar values to the nearest cent. a. Brand U will be $1,051.92 cheaper than Brand V. b. Brand U will be $976.92 cheaper than Brand V. c. Brand V will be $75 cheaper than Brand U. d. Brand V will be $2109.40 cheaper than Brand U.

b. Brand U will be $976.92 cheaper than Brand V.

Xavier is comparing the credit scores of people in his neighborhood. He compiled the scores he found into the table below. What is the median credit score in this group? (Round to the nearest whole point, if applicable.) a. 776 b. 758 c. 845 d. 737

a. 776

Bill was going to purchase a new mountain bike with his credit card, which he thought had an APR of 13%. His plan was to keep his payments around $75 per month for 24 months. He then found out that his credit card actually had an APR of 17%. Which of the following would not allow Bill to purchase a bike while keeping the same monthly payment? a. Purchase a bike that costs less. b. Wait for the bike he wants to go on sale for a cheaper price. c. Purchase the bike in a part of town with a higher sales tax rate. d. Increase the number of months he wants to use to pay off the balance.

c. Purchase the bike in a part of town with a higher sales tax rate.

Eric is comparing the credit scores of his friends. The scores he gathered are found in the table below. Among this batch of credit scores, find whether the mean or the median is higher, and how much higher it is. (Round to the nearest whole point, if applicable.) a. The mean is 113 points higher than the median. b. The mean is 1 point higher than the median. c. The median is 15 points higher than the mean. d. The median is 8 points higher than the mean.

b. The mean is 1 point higher than the median.

You are considering making a major purchase on your credit card. You should ask yourself the following questions, except which answer choice? a. Would it cost me less if I came up with a different purchasing plan? b. What else can I purchase to reach my full credit limit? c. Will I receive any incentives from my credit card company for making this purchase? d. How much will my purchase really end up costing if I don't pay off the balance immediately?

b. What else can I purchase to reach my full credit limit?

Natasha had a $922.93 balance on her credit card at the beginning of September. Her credit card has an APR of 9.89%, compounded monthly, and a minimum monthly payment of 3.08% of the total balance. The following table shows Natasha's credit card purchases over the next two months. If Natasha makes only the minimum payments, what will her balance at the beginning of November? (Assume that the interest accrues before the monthly payment, and that the monthly payment occurs at the end of the month. Round all dollar values to the nearest cent.) a. $1,180.48 b. $1,064.55 c. $1,000.93 d. $1,123.97

c. $1,000.93

Calvin's credit card computes finance charges using the daily balance method. His card has a billing cycle of 30 days and an APR of 14.75%. The following table details Calvin's transactions in the month of September. What will Calvin's starting balance be next month? a. $617.17 b. $624.74 c. $625.91 d. $623.52

c. $625.91

Adam's credit card calculates finance charges using the adjusted balance method and a 30-day billing cycle. The table below shows his use of that credit card over three months. If Adam's credit card has an APR of 14.63%, what is Adam's balance at the end of June? a. $629.42 b. $629.66 c. $627.27 d. $628.40

c. $627.27

From the statements below, identify the way or ways in which making only minimum monthly payments on a long-term credit purchase can be a disadvantage. I. It is illegal to make only the minimum payments for more than one year. II. Repeatedly making minimum payments harms your credit score. III. The total cost is higher if the length of the debt is longer. a. I and II b. II only c. I and III d. II and III

c. I and III

Marilyn has two credit cards, D and E. Card D has a balance of $691.64, and Card E has a balance of $1,014.22. The minimum monthly payment on Card D is 3.57% of the total balance, and the minimum monthly payment on Card E is 2.51% of the total balance. How much greater is the minimum payment on Card E than on Card D? a. $18.85 b. $8.10 c. $11.24 d. $0.77

d. $0.77

Of the following statements, which one or ones indicate possible effects of a low credit score? I. You will have a difficult time qualifying for loans. II. Any loans you take out will be relatively short-term. III. You will have to pay higher than average interest rates. a. I only b. I and II c. III only d. I and III

d. I and III

You are a loan officer trying to decide which clients deserve your best rates. The table below shows the credit scores of several loan applicants. Based on each applicant's median credit score, who deserves your best interest rates? a. Kellin b. Natasha c. Edward d. Lisa

d. Lisa

Which of the following is not a kind of consumer credit? a. installment credit b. personal loans c. service credit d. marginal credit

d. marginal credit

Which of the following types of credits would best describe credit cards? a. closed and secured b. closed and unsecured c. open and secured d. open and unsecured

d. open and unsecured