Quiz chapter 10 x IFreel No Going BackX ezto.mheducation com/hm tpx Ramon Hemand
ID: 2547828 • Letter: Q
Question
Quiz chapter 10 x IFreel No Going BackX ezto.mheducation com/hm tpx Ramon Hemandez saw the following advertisement for a used Volkswagen Bug and decided to work out he numbers to be sure the ad had no errors Cash Price $7,880 Down payment $0 Annual Percentage Rate 14.53% Deferred price $11,131.80 or 60 payments at $185,53 per month a. Calculate the amount financed Amount financed b. Calculate the finance charge. (Do not round intermediate calculations. Round your answer to the nearest cent.) Finance change c. Calculate the APR by formula. (Do not round intermediate calculations. Enter your answer as a percentage rounded to 1 decimal place.) APR by formula ate the monthly payment by add-on-method. (Do not round intermediate calculations. Round your answer to the nearest cent.) Monthly payment by add-on-method S e. Calculate the monthly payment by formula. (Do not round intermediate calculations. Round your answer to the nearest cent.) Monthly payment by formula 5Explanation / Answer
Answer a:
Amount finance = $7,880
Given:
Cash price = $7,880
Down payment = $0
Hence, amount financed = $7,880 - $0 = $7,880
Answer b:
Finance charge = $3,251.80
Given:
Monthly payment = $185.53
Number of payments = 60
Hence finance charge = $185.53 * 60 - $7,880 = $3,251.80
Answer c:
APR by formula = 14.53%
Using Excel formula for RATE (nper,Pmt,pv, fv, type)
Answer d:
Monthly payment by add-on method = $226.75
Total interest charged (over life span of loan) = $7,880 * 14.53%/12 * 60 = $5,724.82
Monthly payment = ( Total interest + principal) / number of periods/months = ($5,724.82 + $7,880) / 60 = $226.75
Answer e:
Monthly payment by formula = $185.53
Monthly payment = P * r *(1+ r)n / [(1+ r)n - 1]
where P = Principal, r = rate of interest and n = number of periods
= $7,880 * 14.53%/12 * (1+ 14.53%/12)60 / [(1+ 14.53%/12)60- 1]
= $7,880 * 14.53%/12 * 2.058827885 / 1.058827885
= $185.53
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