# finance charge

finance charge
Dave borrowed \$950 for one year and paid \$52.50 in interest. The bank charged him a \$4.50 service charge. What is the finance charge on this loan?

2. Rebecca wants to buy a new saddle for her horse. The one she wants usually costs \$600, but this week it is on sale for \$550. She does not have \$550, but she could buy it with \$60 down and pay the rest in 6 months with 9 percent interest. How much will Rebecca save by buying the saddle this week?

3. You can buy an item for \$135 on a charge with the promise to pay \$135 in 90 days. Suppose you can buy an identical item for \$132 cash. If you buy the item for \$135, you are in effect paying \$3 for the use of \$132 for three months. What is the effective annual rate of interest? Ignore interest rate compounding.

4. Dave borrowed \$600 on January 1, 2006. The bank charged him a \$5.00 service charge and interest was \$44.20. He paid the \$600 in 12 equal monthly payments, what was the APR?

5. Sidney took a \$200 cash advance by using checks linked to her credit card account. The bank charges a 3 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)

\$ 6

(b)
What was the interest for one month at an 12 percent APR? (Omit the “\$” sign in your response.)

Interest
\$

(c)
What was the total amount she paid? (Omit the “\$” sign in your response.)

Total amount

What are the interest cost and the total amount due on a six-month loan of \$1,800 at 14.4 percent simple annual interest?

Interest cost
\$
Total amount due

After visiting several automobile dealerships, Richard selects the used car he wants. He likes its \$13,900 price, but financing through the dealer is no bargain. He has \$2,500 cash for a down payment, so he needs an \$11,400 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 \$11,400 for a period of four years at an add-on interest rate of 10 percent.

What is the total interest on Richardâ€™s loan? (Do not round your intermediate calculations. Round your answer to the nearest dollar amount. Omit the “\$” sign in your response.)

Total interest
\$

(b)
What is the total cost of the car? (Do not round your intermediate calculations. Round your answer to the nearest dollar amount. Omit the “\$” sign in your response.)

Total cost
\$

(c)
What is the monthly payment? (Do not round your intermediate calculations. Round your answer to 2 decimal places. Omit the “\$” sign in your response.)

Monthly payment
\$

(d)
What is the annual percentage rate (APR)? (Do not round your intermediate calculations. Round your answer to 2 decimal places. Omit the “%” sign in your response.)

Annual percentage rate
%