installment buying and credit cards. simple finance charges the finance charge is the amount of the...
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3.3Installment Buying and Credit Cards
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Simple Finance ChargesThe finance charge is the amount of the
purchase in excess of the selling price. Barry wants to purchase a tv for $1540.
Since he does not have the cash up front, he enter into an agreement to pay $55 a month for 36 months. Find the total cost and the finance charge for this purchase.
55*36=1980. therefore, the finance charge would be then 1980-1540=$440
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Monthly PaymentsA light saber is for sale at a price of $1250,
but it may be purchased on an installment plan by paying $300down, and then paying the balance plus 16% simple interest in 12 monthly payments. What would be the amount of each payment?
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Using simple interest formula, I = 950*.16*1=$152. So 950 + 152 = $1102 is the balance. Since there will be 12 payments, each one should be 1102/12=$91.83
The total cost of the light saber would be the price of $1250 plus the finance charge of 152, or $1402.
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Ron Weasly buys a Nimbus 2000 for g450 (g-galleons, currency in the wizard world) and pays for it over two years with 11.5% simple interest. What is the monthly payment.
I=450*.115*2=103.50Total amount=103.5+450=553.5553.5/24=23.06So the monthly payment is g 23.06Except for the last month, the last month
payment is g23.12
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Credit card and Finance ChargesThe finance charge on a credit card is the
simple interest on the average daily balance using a daily interest rate.
The billing cycle is the number of days between credit card statements, and usually corresponds to the number of days in a specific month, which will be 28, 30 or 31 days.
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How many days are in the billing cycle that runs from the June 15 through July 14?
30 days.If a credit card has a balance of $20 for 21
days and then a balance of $40 for 9 days, what is the average daily balance for that 30-day period?
20*21=420 and 40*9=360420+360=780ADB: 780/30=$26ADB- the average daily balance is just that-
the average of the daily balances for all the days in the billing cycle.
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Daily interest rate: the interest rate stated with a credit card is always an annual percentage rate (APR).
Since there are 365 days in a year, the daily interest rate is the APR/365.
APR/366
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Monthly Finance ChargeMonthly Finance Charge = (ADB) *
(APR/365)*(# Of Days in Billing Cycle)
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Lets say we have an average daily balance of $456 on a credit card with an APR of 12.9%, over a billing period of 31 days. What would be the finance charge be?
456*(.129/365)*31=$5.00 (to the nearest cent)
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The balance on the Harry’s credit card on May 12, his billing date, was g378.50. For the period ending June 11, he made the following transactions.
May 12, Charge : toys, g129.79May 15, Payment: g50.00May 18, Charge: Clothing, g135.85May 29, Charge: Gasoline, g37.63A. Find the average daily balance for the billing
period.B. Find the finance charge that is due on June
12. Assume APR of 15.6%C. Find the balance that is due on June 12.
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Dates # of days Balance Due #of Days*Balance
May 12 1 g378.50 g378.50
May13-14 2 g508.29 g1016.58
May 15-17 3 g458.29 g1374.87
May 18-28 11 g594.14 g6535.54
May 29-June 11 14 g631.77 g8844.78
Totals: 31 g18150.27
• The average daily balance us 18150.27/31 = g585.49 • The finance charge is 585.49*(.156/365)*31=g7.76• The balance due on June 12 is 631.77+7.76=g639.53
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The balance on Smiths Credit card on November 8, their billing date, was $812.96. For the period ending December 7, they made the following transactions.
November 13, charge: toys, $231.10November 15, Payment: $500November 29, charge: Clothing, $87.19Assuming they have an APR of 5.9%, find the
balance that is due on December 8.
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The average daily balance is $19451.01/30=$648.37
That makes the finance charge 648.37*(.059/365)*30=$3.14
Then, the balance forwarded is $631.25+$3.14=$634.39
Dates #of days Balance due #of days *balance
Nov 8-12 5 $812.96 $4064.80
Nov 13-14 2 $1044.06 $2088.12
Nov 15-28 14 $544.06 $7616.84
Nov29-dec7 9 $631.25 $5681.25
Totals 30 $19,451.01
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HW 3.3 pg 1841-15