Question

1. On January 1, Kenneth borrows $5600 with a fixed interest rate on the loan of 10% and a loan term of 2 years. He will be making monthly payments of $258.41. How much of Kenneth’s first loan payment on February 1 would be principal? (Round answers to 2 decimal places, e.g. 52.75.)

$213.51

$211.74

$289.08

$252.06

2.What is the key variable in negotiating an auto loan?

Maintenance schedule.

Lowest interest rate possible.

Length of the loan.

Payment.

3.William wants to purchase a car. He reviewed his budget and can comfortably afford a car payment of $320 per month. He has good credit and anticipated being able to secure a 5-year loan at 5% interest. What is the maximum cost he should pay for a car to stay within his budgeted monthly amount?

$13631.

$16940.

$14806.

$13666.

4. It's June and Anthony’s credit card has a balance of $3100. The minimum payment due is $124. The APR is 21.17%. How much interest will he pay this month?

$57.54

$58.84

$53.94

$56.94

Answer 1

1

Principal payment = 258.41 * 5600 * 10%/12 = 211.74

2

Lowest interest rate possible

3

a	Present value of annuity=	P* [ [1- (1+r)-n ]/r ]
P=	Periodic payment	320.00
r=	Rate of interest per period
	Annual interest	5.00%
	Number of payments per year	12
	Interest rate per period	0.05/12=
	Interest rate per period	0.417%
n=	number of periods:
	Number of years	5
	Periods per year	12
	number of payments	60
	Present value of annuity=	320* [ (1- (1+0.00417)^-60)/0.00417 ]
	Present value of annuity=	16,957.03

Value of car is 16940

4

Interest = (3100 - (124 - 3100 *21.17%/12) )*21.17%/12 = 53.94