The Cost of Credit
Shelby's total closed-end credit for her car (including all interest) cost $9,478.58. The table shows the schedule of her payments for the first 4 years. What is the total amount of interest Shelby will pay for the car loan? How many more years will it take Shelby to pay off her loan?
$2478.58 1 year
open end closed end easy access
reoccuring back to back large purchases over years emergencies
principal
the amount of money borrowed with closed-end credit that excludes accrued interest
What is the difference between open-end credit, and closed-end credit, and what are the costs associated with each?
Closed-end credit is a form of credit that must be paid off by a specific date. Open-end credit is an amount of credit that can be borrowed repeatedly as long as consistent payments are made according to the bank's terms. The cost of these types of credit are fees and interest rates charged by the lender.
Aria has a credit card that gives a 5% discount on every purchase and free shipping when used online. The annual percentage rate on the credit card is 18%. Aria wants to buy a doghouse that costs $580. Which statement about the cost of the doghouse is true?
If Aria uses the credit card and pays the full balance during the billing cycle, she will spend $29.00 less than paying cash for the doghouse.
rajś credit card
24.75
choosing and repyaing with closed end credit
choose: lowest interest rate (fixed or variable), amount of down payment required, additional fees repaying: your payment will be part principal and part accrued interest. to calculate monthly payment consider amount borrowed, interest rate and term of loan
choosing and repyaing with open end credit
choose: no annual fee, lowest interest rate, grace period, rewards program. repaying: APR (unpaid balances each month due, divide by 12 to calculate % in each billing cycle), pay full if possible or minimum.
closed end credit
credit that is to be repaid in full by a specific date car loan and home loan usually for large purchases and interest rate based on credit history
Which is a desirable characteristic to look for when choosing a credit card?
no annual fee
three main categories of credit
open end, closed end, easy access
The Lagan family bought a $150,000 home in 2002. They obtained a mortgage loan for 30 years. The monthly payments, not including property taxes and insurance, are $895.00. Assuming these monthly payments do not change, how much interest will be paid on the house during the 30 years?(Monthly Payment)(12 months per year)(30 years)(895)(12)(30) = $322,200 total amount paid (principal and interest)
$172,200 of interest
Arthur has an April credit card balance of $325.24. His repayment date is the 25th of every month, with a grace period of 5 days. If his payment is late, the credit card company charges him a $25 late fee. Arthur wants to repay the full amount to have a zero balance. How much should Arthur pay if his online payment is processed on May 1?
$350.24, the April balance plus the late fee
Open-end credit is
an agreement with an institution on a certain amount that can be repeatedly borrowed.
collateral
an item with economic value that is pledged to an institution as security for a loan repayment
Jessica is trying to get a credit card. She has a credit score of 790. How is Jessica's lender likely to view this credit score?
jessica is low risk and will pay her outstanding balances on time
APR %s 10 12.5 20 14.5
monthly percentage rate % 0.83 1.04 1.67 1.21
grace period
the extra amount of time given to make a credit payment without penalty
which information can be found on a credit repot
unpaid utility bill credit rateing social security number inquiry from bank
The table shows a schedule of Igor's payment plan for a used car.
14719.80
gigis credit card
15.75
Travis wants to borrow money to start a racquetball club at his school. He convinced the athletic department to loan him $2,500 to purchase equipment and rent a practice facility. Travis agreed to an interest rate of 7%, and to pay back the money at the end of the year. How much money will Travis have to pay back to the athletic department?
2675
The table shows a schedule of Inga's payment plan for a car.
3 years
kamils
3 years
It will take Cody 3 months to save up enough money to purchase a stereo. He has a credit card with a 12% interest rate. Cody's friend Mark says it will cost Cody less money if he saves for 3 months instead of using the credit card. Is Mark correct?
Mark is correct. If Cody uses the credit card, he will have to pay interest during each month in which he does not pay off the balance of the card. If he saves money, he will not have to pay interest.
Maura had to get a $350 emergency loan at a very high interest rate to pay for dental work. The lender did not need her credit history. If she does not pay back the loan within three weeks, she will have to pay an extra $50. Raina says the loan is an example of easy-access credit while Maura says it is an example of open-end credit. Which statement about the loan is correct?
Raina is correct because the loan has a large fee if it is not repaid on time.
easy access credit
short term loans not based on credit history that typically payday loan or title loan higher interest rates, collateral required, large fees if not paid on time,, only for emergrncies
Annual Percentage Rate (APR)
the annual interest rate that is charged for borrowing money from an institution
vera has a june
506.09
Jason keeps track of his credit card information in this table. Jason has a credit card that charges 2% interest on unpaid balances each month. He spent $300, but only makes the minimum payment of $30 a month when the bill is due. What is the balance on his credit card account after making his payment at the end of the fourth month?
$201.08
mr kirovs plan
6 payments
Caitlyn has a credit card with a spending limit of $1500 and an APR (annual percentage rate) of 18%. During the first month, Caitlyn charged $375 and paid $250 of that in her billing cycle. Which expression will find the amount of interest Caitlyn will be charged after the first month?
(0.015) ($125)
Ava has a credit card that gets her a 5% discount on every purchase and free shipping when used online. The annual percentage rate on the credit card is 16%. If Ava pays cash, the purchase will be $200. If Ava uses the credit card and pays the full balance during the billing cycle, the purchase will be $190. If Ava uses the credit card and pays the balance off at $20 a month for 11 months, with no late fees, the purchase will be $213.06. Ava goes to the store and chooses clothes and shoes for a new job. The purchases total $200. Ava has a choice: pay with cash or pay with the credit card that gives the discount. How much will Ava save immediately if she uses the credit card and pays the balance during the billing cycle? How much will Ava pay in interest if she pays back the card in 11 months?
10 13.06
The table shows a schedule of Evita's payment plan for a used car.Evita's Payment Plan for the First Three YearsYearBalanceMonthly PaymentEnd of YearBalance1 $356.82 2 $356.82 3 $356.82$8,563.39Evita paid $2,408.91 in interest. What was the selling price of the car?
19000
Rita has a credit card that gives a 6% discount on every purchase. The annual percentage rate on the card is 15%. She is purchasing a digital camera for $300. If she purchases the camera and only pays $80 on the first month's bill, how much will she need to pay off the balance the following month?
204.53
The table shows Mr. Winkler's schedule for paying off his credit card balance. If he continues to make monthly payments of $100, and makes no new purchases, how many more payments will he have to make before the balance is zero? Mr. Winkler needs to make more payments.
3
Jack purchased a car for $22,000. The bank gave him an annual interest rate of 4.3%. He will make monthly payments for 6 years (or 72 months). Jack followed these steps to determine his approximate monthly payments. Read through the steps, and then choose Jack's approximate monthly payment from the drop‐down menu. 1.Calculate the interest rate per period.0.04312 ≈ 0.00358 2.Add 1 to the interest rate per period.1 + 0.00358 = 1.00358 3.Raise the number calculated in step 2 to the negative power of the number of loan payments to be made, and then subtract this number from 1.1.00358-(12)(6) = 1.00358-72 ≈ 0.77311 − 0.7731 = 0.2269 4.Divide the interest rate per period by the number calculated in step 3.0.003580.2269 ≈ 0.0158 5.Multiply the quotient from step 4 by the principal.Jack's monthly payment ≈ _________________ Complete step 5 to determine Jack's monthly payment for the loan. Round to the nearest cent.
347.60
a person´s credit score can range from low og 300 to high
850
Sienna has a car loan with an annual interest rate of 4.8%. She will make the same monthly payment for 48 months, after which the loan will be paid back. Diego says that Sienna's loan is an example of closed-end credit while Sienna says it is an example of open-end credit. Which statement about the loan is true?
Diego is correct because the loan has to be paid in full by a specific date.
Which would be considered closed-end credit situations? Check all that apply.
Jason bought a used car and got a loan from his credit union. The Overtons bought a new home and mortgaged it for 30 years. NOT Samantha got her first credit card at age 18 with a credit limit of $300. Tammy borrowed $40,000 in school loans to be paid back in 5 years. NOT Tim always pays his credit card balance in full each month.
Candice wants to buy a $2500 scooter with a loan from her local bank. Which loan option would be best for Candice if she wants the lowest interest rate and wants to pay off the scooter within 5 years.
Loan option 1 will take less than 4 years to pay off and have an annual interest rate of 15%, and total interest of about $700.
Mo has a credit card that gives a 3% discount on every purchase. The annual percentage rate on the card is 12%. He is purchasing an electronic reader for $140. Check all that apply.
NOT If Mo uses the credit card and pays the full balance during the billing cycle, the cost of the purchase will be $140. If Mo pays cash, the cost of the purchase will be $140. NOT If Mo uses the credit card and pays off the balance at $30 a month for 7 months with no late fees, the cost of the purchase will be $143.34. NOT If Mo pays cash, the cost of the purchase will be $135.80. If Mo uses the credit card and pays off the balance at $20 a month for 7 months with no late fees, the cost of the purchase will be $139.89. If Mo uses the credit card and pays the full balance during the billing cycle, the cost of the purchase will be $135.80.
Gary purchased a $750 TV on a credit card with a 22% annual percentage rate, and he wants to pay it off in payments of $200 per month. The table shows the information for the first four months after Gary used his credit card.
a= 3.06 b=169.74 c=0 total=769.74
open-end credit
an agreement by a bank to loan a certain amount of money, which can be borrowed again once the original amount is repaid (also called revolving credit) credit cards or a line of credit at a bank for business owners can have grace periods, annual fees, interest rates beased on credit history, late fees and interest after grace period, credit card reward programs
