chap 14-9-10 Jill bought a $640 rocking chair. The terms of her revolving charge

Question

chap 14-9-10

Jill bought a $640 rocking chair. The terms of her revolving charge are 2% on the unpaid balance from the previous month. If she pays $100 per month, complete a schedule for the first 3 months like Table 14.3. Be sure to use the U.S. Rule. (Round your final answers to the nearest cent.)

Peg Gasperoni bought a $50,000 life insurance policy for $160 per year. Ryan Life Insurance Company sent her the following billing instructions along with a premium plan example:

"Your insurance premium notice will be mailed to you in a few days. You may pay the entire premium in full without a finance charge or you may pay the premium in installments after a down payment and the balance in monthly installments of $40. The finance charge will be added to the unpaid balance. The finance charge is based on an annual percentage rate of 18%."

Peg feels that the finance charge of $3.90 is in error. Check your answer.

a. What is the actual finance charge for the first three months? (Round your answer to the nearest cent.)

Finance Charge            $

Monthly payment number Outstanding balance due 2% interest payment Amount of monthly payment Reduction in balance due Outstanding balance due 1 $ $ $ $ $ 2 $ $ $ $ $ 3 $ $ $ $ $

Peg Gasperoni bought a $50,000 life insurance policy for $160 per year. Ryan Life Insurance Company sent her the following billing instructions along with a premium plan example:

"Your insurance premium notice will be mailed to you in a few days. You may pay the entire premium in full without a finance charge or you may pay the premium in installments after a down payment and the balance in monthly installments of $40. The finance charge will be added to the unpaid balance. The finance charge is based on an annual percentage rate of 18%."

If the total
policy premium is: And you put down: The balance subject to finance charge will be: The total number of monthly installments
($30 minimum)
will be: The monthly installment before adding the finance charge will be: The total finance charge for all installments
will be: And the total deferred payment price will be: $160 $40.00 $120.00 3 $40.00 $3.90 $163.90 $260 $60.00 $200.00 5 $40.00 $9.23 $269.23 $360 $85.00 $275.00 7 $40.00 $17.39 $377.39

Peg feels that the finance charge of $3.90 is in error. Check your answer.

a. What is the actual finance charge for the first three months? (Round your answer to the nearest cent.)

Finance Charge            $

TABLE 14.3 Schedule of payments Monthly payment number Outstanding balance due Amount of monthly payment $500.00 11% interest payment 120.00 (015 × $8,000.00) $114.30 015 $7,620.00) Reduction in balance due $380.00 ($500.00 $120.00) $385.70 ($500.00 1 14.30) $391.49 ($500.00 $108.51) Outstanding balance due $8,000.00 $7,620.00 ($8,000.00 $380.00) $7,234.30 ($7,620.00 $385.70) $6,842.81 ($7,234.30 $391.49) $7,620.00 $500.00 $7,234.30 $108.5 015 x $7,234.30) $500.00

Explanation / Answer

14-9-10:

Calculations and explanations:

Interest for month 1 = 2/100*640 = 12.80. Reduction in balance = 100-12.80 = 87.20. Outstanding balance = 640-87.20 = 552.80

Interest for month 2 = 2/100*552.80 = 11.06. Reduction in balance = 100-11.06 = 88.94. Outstanding balance = 552.80-88.94 = 463.86

Interest for month 3 = 2/100*463.86 = 9.28. Reduction in balance = 100-9.28 = 90.72. Outstanding balance = 463.86-90.72 = 373.13

Monthly payment number Outstanding balance due 2% interest payment Amount of monthly payment Reduction in balance due Outstanding balance due 1 640.00 12.80 100.00 87.20 552.80 2 552.80 11.06 100.00 88.94 463.86 3 463.86 9.28 100.00 90.72 373.13

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