Question

Sidney took a $150 cash advance by using checks linked to her credit card account. The bank charges a 2 percent cash advance fee on the amount borrowed and offers no grace period on cash advances. Sidney paid the balance in full when the bill arrived.
a.
What was the cash advance fee? (Round your answer to 2 decimal places.)

Cash advance fee $
b.
What was the interest for one month at an APR of 16 percent? (Round your answer to 2 decimal places.)

Interest $
c. What was the total amount she paid? (Round your answer to 2 decimal places.)
Total amount $
d.
What if she had made the purchase with her credit card and paid off her bill in full promptly? Assume the credit card has a grace period. (Round your answer to 2 decimal places.)

Amount paid $
9.

What are the interest cost and the total amount due on a six-month loan of $1,200 at 13 percent simple annual interest?
10.

After visiting several automobile dealerships, Richard selects the car he wants. He likes its $13,500 price, but financing through the dealer is no bargain. He has $2,700 cash for a down payment, so he needs an $10,800 loan. In shopping at several banks for an installment loan, he learns that interest on most automobile loans is quoted at add-on rates. That is, during the life of the loan, interest is paid on the full amount borrowed even though a portion of the principal has been paid back. Richard borrows $10,800 for a period of five years at an add-on interest rate of 11 percent.



a.
What is the total interest on Richard’s loan?



Total interest $


b.
What is the total cost of the car?



Total cost $


c. What is the monthly payment?


Monthly payment $


d.
What is the annual percentage rate (APR)? (Enter your answer as a percent rounded to 2 decimal places.

APR %
Interest cost $
Total amount due $

Answer 1

Answer:

A.) 3%; B.) 2% ; C) $155; D) $150

9) $78 ; $1278

10) a) $5940; b) $19440; c) $279; D) 21.64%

Explanation:

Amount = $150

Cash advance rate = 2% = 0.02

A.) cash advance fee = $150 × 0.02 = $3

B.) Interest for one month at APR of 18%

Interest = principal × time × rate

$150 × (1÷12) × 0.16 = $2.00

C.) Total amount paid

$(150 + 3 + 2) = $155

D.) $150

9.)

Interest = principal × rate × time

t = 6 months = (6/12)

Rate (r) = 0.13

Principal = $1200

Interest = $1200 × 0.13 × 0.5 = $78

Total amount = down payment + principal borrowed + interest

Total amount = 0 + $1200 + $78 = $1,278

10.)

Price = $13,500

Down payment = $2700

Loan required = $10,800

Add-on rate = 11% = 0.11

Period = 5 years

A.) Interest = $10,800 × 0.11 × 5 = $5,940

B.) Total cost = Down payment + Principal borrowed + interest paid

$2700 + $10,800 + $5940 = $19,440

C.) Monthly Payment = (Principal Borrowed + Total interest) / Total number of payments

Monthly Payment = ($10800+ $5940) / (12×5)

Monthly payment = $16740 ÷ 60 =$279

D.) Annual percentage rate (APR)

APR= (2 × n × I) / [P × (N + 1)]

APR = (2 × 12 × 5940) / [10800 × (60+1)]

APR = 142560 ÷ 658800

APR = 0.21639

APR = 21.64%