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Chapter 8: Problem 17
Describe two aspects of responsible credit card use.
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Exercises 3-4 involve credit cards that calculate interest using the average daily balance method. The monthly interest rate is \(1.2 \%\) of the average daily balance. Each exercise shows transactions that occurred during the June 1-June 30 billing period. In each exercise, a. Find the average daily balance for the billing period. Round to the nearest cent. b. Find the interest to be paid on July 1 , the next billing date. Round to the nearest cent. c. Find the balance due on July 1 . d. This credit card requires a \(\$ 30\) minimum monthly payment if the balance due at the end of the billing period is less than \(\$ 400\). Otherwise, the minimum monthly payment is \(\frac{1}{25}\) of the balance due at the end of the billing period, rounded up to the nearest whole dollar. What is the minimum monthly payment due by July 9? $$ \begin{array}{|l|c|} \hline \text { Transaction Description } & \text { Transaction Amount } \\ \hline \text { Previous balance, } \$ 4037.93 & \\ \hline \text { June } 1 \quad \text { Billing date } & \\ \hline \text { June } 5 \quad \text { Payment } & \$ 350.00 \text { credit } \\\ \hline \text { June } 10 \text { Charge: Gas } & \$ 31.17 \\ \hline \text { June } 15 \text { Charge: Prescriptions } & \$ 42.50 \\ \hline \text { June } 22 \text { Charge: Gas } & \$ 43.86 \\ \hline \text { Charge: Groceries } & \$ 112.91 \\ \hline \text { June } 29 \text { Charge: Clothing } & \$ 96.73 \\ \hline \text { June } 30 \text { End of billing period } & \\ \hline \text { Payment Due Date: July } 9 & \\ \hline \end{array} $$
Describe two disadvantages of leasing a car over buying one.
The price of a home is \(\$ 220,000\). The bank requires a \(20 \%\) down payment and three points at the time of closing. The cost of the home is financed with a 30 -year fixed-rate mortgage at \(7 \%\). a. Find the required down payment. b. Find the amount of the mortgage. c. How much must be paid for the three points at closing? d. Find the monthly payment (excluding escrowed taxes and insurance). e. Find the total cost of interest over 30 years.
Group members should go to the Internet and select a car that they might like to buy. Price the car and its options. Then find two loans with the best rates, but with different terms. For each loan, calculate the monthly payments and total interest.
Risky Credit Arrangements Group members should present a report on the characteristics and financial risks associated with payday lending, tax refund loans, and pawn shops.
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