Ch14 Installment Buying Test Bank Docx - Business Math Procedures 13e Test Bank with Answers by Jeffrey Slater. DOCX document preview.
Practical Business Math Procedures, 13e (Slater)
Chapter 14 Installment Buying
1) The amount financed equals the cash price plus the down payment.
Difficulty: 1 Easy
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
2) The cost of credit reports would be included in the amount financed.
Difficulty: 1 Easy
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
3) Amortization is not a payment process.
Difficulty: 1 Easy
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
4) Finance charge equals total of all monthly payments minus amount financed.
Difficulty: 1 Easy
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
5) The APR represents the stated interest rate.
Difficulty: 1 Easy
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
6) The Truth in Lending Act regulates interest charges.
Difficulty: 1 Easy
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
7) APR cannot be calculated by use of tables.
Difficulty: 1 Easy
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (2) Calculate the estimated APR by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
8) Calculating APR by table lookup requires that the total amount financed be divided by the interest charge and then multiplied by 100.
Difficulty: 2 Medium
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (2) Calculate the estimated APR by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
9) When using Table 14-2 to calculate the monthly payment, first divide the loan amount by $100.
Difficulty: 1 Easy
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (3) Calculate the monthly payment by formula and by table lookup.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
10) The monthly payment is calculated by totaling the finance charge and amount financed and dividing that by the number of payments of the loan.
Difficulty: 2 Medium
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
11) The Fair Credit and Charge Card Disclosure Act of 1988 is optional advice to credit card companies.
Difficulty: 1 Easy
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
12) Revolving charge accounts must be paid off completely by the end of the month.
Difficulty: 1 Easy
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
13) The U.S. Rule can be applied to open credit payments.
Difficulty: 1 Easy
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
14) Today most companies calculate the finance charge on their credit card accounts as a percentage of the yearly balance.
Difficulty: 1 Easy
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
15) A billing cycle is always 30 or 31 days.
Difficulty: 1 Easy
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
16) The daily balance is the previous balance plus cash advances plus purchases minus any payments.
Difficulty: 1 Easy
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
17) The average daily balance is the same as the daily balance.
Difficulty: 1 Easy
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
18) Average daily balance is equal to sum of daily balances divided by number of days in the billing cycle.
Difficulty: 1 Easy
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
19) Amount financed is equal to:
A) Cash price times down payment
B) Cash price plus down payment
C) Cash price minus down payment
D) Cash price divided by down payment
E) None of these
Difficulty: 1 Easy
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
20) The finance charge is equal to the total of all monthly payments:
A) Plus amount financed
B) Minus amount financed
C) Divided by amount financed
D) Multiplied by amount financed
E) None of these
Difficulty: 1 Easy
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
21) The APR represents the:
A) Stated rate of interest
B) True effective quarterly interest rate charged by seller
C) True effective annual rate of interest charged by buyer
D) True effective annual rate of interest charged by seller
E) None of these
Difficulty: 1 Easy
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
22) Which one of the following statements is incorrect?
A) APR is the true effective annual interest charged by sellers
B) The Truth in Lending Act regulates interest charges
C) APR represents the true effective annual rate of interest
D) An installment loan is paid off with a series of equal periodic payments
E) None of these
Difficulty: 1 Easy
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
23) Open credit in a revolving charge plan results in:
A) One purchase per month
B) The U.S. Rule being applied to each purchase
C) As many cash purchases till credit limit is reached
D) As many charged purchases till credit limit is reached
E) None of these
Difficulty: 1 Easy
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
24) Most companies calculate the finance charge on credit card accounts as a percentage of the:
A) Daily balance
B) Weekly balance
C) Average daily balance
D) Average weekly balance
E) None of these
Difficulty: 1 Easy
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
25) In calculating the daily balance, cash advances are:
A) Added in
B) Subtracted out
C) Sometimes added in
D) Sometimes subtracted out
E) None of these
Difficulty: 1 Easy
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
26) The average daily balance is equal to the sum of daily balances:
A) Plus number of days in billing cycle
B) Minus number of days in billing cycle
C) Divided by number of days in billing cycle
D) Multiplied by number of days in billing cycle
E) None of these
Difficulty: 1 Easy
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
27) Dan Miller bought a new Toyota truck for $28,000. Dan made a down payment of $6,000 and paid $390 monthly for 70 months. The total finance charge was:
A) $13,300
B) $5,300
C) $11,300
D) $27,300
E) None of these
Difficulty: 3 Hard
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
28) Justin Chan bought a Scion car for a price of $8,200, putting down $800 and financing the remainder with 60 monthly payments of $179.99. The APR by table lookup is (use the tables in the handbook):
A) Close to 15%
B) Close to 14%
C) Close to 13 ½%
D) Between 16.00% and 16.25%
E) None of these
Difficulty: 3 Hard
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (2) Calculate the estimated APR by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
29) Given:
$140.10 per month; cash price $5,600; down payment $0
Cash or trade months with bank-approved credit; amount financed $5,600
Finance charge $2,806
Total payments $8,406
(Use the tables in the handbook.) The APR by table lookup is:
A) 17.25% - 17.50%
B) 17.00%
C) 16.75%
D) 16.50%
E) None of these
Difficulty: 2 Medium
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
30) Mia Lane bought a high-definition television for $7,500. Based on her income, she could afford to pay back only $600 per month. There is 1 ½% monthly interest charge on the unpaid balance. The U.S. Rule is used in the calculation. At the end of month 1, the balance outstanding is:
A) $6,012.50
B) $5,012.50
C) $4,012.50
D) $3,012.50
E) None of these
Difficulty: 3 Hard
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
31) Ed Sloan bought a new Explorer for $22,000. He put down $7,000 and paid $290 for 60 months. The total finance charge to Ed is:
A) $15,000
B) $17,400
C) $2,400
D) $4,200
E) None of these
Difficulty: 3 Hard
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
32) John Sullivan bought a new Brunswick boat for $17,000. He made a $2,500 down payment on it. The bank's loan was for 60 months. Finance charges totaled $4,900. His monthly payment is:
A) $313.33
B) $323.33
C) $332.33
D) $232.33
E) None of these
Difficulty: 3 Hard
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (3) Calculate the monthly payment by formula and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
33) Given the following:
29 day billing cycle | |
4/17 Billing date previous balance | $1,100 |
4/27 Payment | $700 |
4/29 Charge | $300 |
5/7 Payment | $50 |
The average daily balance is:
A) $910.34
B) $755.17
C) $810.43
D) $755.71
E) None of these
Difficulty: 2 Medium
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
34) Given a mortgage of $48,000 for 15 years with a rate of 11%, what are the total finance charges?
A) $50,236.80
B) $5,023.68
C) $545.76
D) $54,576
E) None of these
Difficulty: 2 Medium
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
35) Jen purchased a condo in Naples, Florida, for $699,000. She put 20% down and financed the rest at 5% for 35 years. What are Jen's total finance charges?
A) $457,425.60
B) $606,823.20
C) $626,863.20
D) $600,000.00
E) None of these
Difficulty: 3 Hard
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
Match the following terms with their definitions.
A) Total of all payments minus amount financed
B) Effective interest rate
C) A payment process
D) A revolving charge account
E) Sum of daily balance divided by number of days in billing cycle
F) Total of all monthly payments plus down payment
G) Used in calculation of average daily balance
H) Doesn't dictate interest rates
I) Cash price minus down payment
J) Used to calculate rebate of finance charge
K) Purchase till maximum credit reached
L) Initial cash payment
36) Deferred payment
Difficulty: 1 Easy
Topic: LU 14-01 Cost of Installment Buying; LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.; 14-01 (2) Calculate the estimated APR by table lookup.; 14-01 (3) Calculate the monthly payment by formula and table lookup.; 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
37) Finance charge
Difficulty: 1 Easy
Topic: LU 14-01 Cost of Installment Buying; LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.; 14-01 (2) Calculate the estimated APR by table lookup.; 14-01 (3) Calculate the monthly payment by formula and table lookup.; 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
38) Revolving charge
Difficulty: 1 Easy
Topic: LU 14-01 Cost of Installment Buying; LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.; 14-01 (2) Calculate the estimated APR by table lookup.; 14-01 (3) Calculate the monthly payment by formula and table lookup.; 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
39) Open-end credit
Difficulty: 1 Easy
Topic: LU 14-01 Cost of Installment Buying; LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.; 14-01 (2) Calculate the estimated APR by table lookup.; 14-01 (3) Calculate the monthly payment by formula and table lookup.; 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
40) Down payment
Difficulty: 1 Easy
Topic: LU 14-01 Cost of Installment Buying; LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.; 14-01 (2) Calculate the estimated APR by table lookup.; 14-01 (3) Calculate the monthly payment by formula and table lookup.; 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
41) Amortization
Difficulty: 1 Easy
Topic: LU 14-01 Cost of Installment Buying; LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.; 14-01 (2) Calculate the estimated APR by table lookup.; 14-01 (3) Calculate the monthly payment by formula and table lookup.; 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
42) Cash advance
Difficulty: 1 Easy
Topic: LU 14-01 Cost of Installment Buying; LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.; 14-01 (2) Calculate the estimated APR by table lookup.; 14-01 (3) Calculate the monthly payment by formula and table lookup.; 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
43) APR
Difficulty: 1 Easy
Topic: LU 14-01 Cost of Installment Buying; LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.; 14-01 (2) Calculate the estimated APR by table lookup.; 14-01 (3) Calculate the monthly payment by formula and table lookup.; 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
44) Truth in Lending Act
Difficulty: 1 Easy
Topic: LU 14-01 Cost of Installment Buying; LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.; 14-01 (2) Calculate the estimated APR by table lookup.; 14-01 (3) Calculate the monthly payment by formula and table lookup.; 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
45) Amount financed
Difficulty: 1 Easy
Topic: LU 14-01 Cost of Installment Buying; LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.; 14-01 (2) Calculate the estimated APR by table lookup.; 14-01 (3) Calculate the monthly payment by formula and table lookup.; 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
46) Average daily balance
Difficulty: 1 Easy
Topic: LU 14-01 Cost of Installment Buying; LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.; 14-01 (2) Calculate the estimated APR by table lookup.; 14-01 (3) Calculate the monthly payment by formula and table lookup.; 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
47) Rule of 78
Difficulty: 1 Easy
Topic: LU 14-01 Cost of Installment Buying; LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.; 14-01 (2) Calculate the estimated APR by table lookup.; 14-01 (3) Calculate the monthly payment by formula and table lookup.; 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Remember
Type: Static
Accessibility: Keyboard Navigation
Answers: 36) F 37) A 38) K 39) D 40) L 41) C 42) G 43) B 44) H 45) I 46) E 47) J
48) Calculate the finance charge:
Sofa purchase price | Down Payment | Number of monthly payments | Amount of monthly payments |
$1,600 | $400 | 12 | $190 |
$2,280 - $1,200 = $1,080.
Difficulty: 2 Medium
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
49) Calculate APR by table lookup (to nearest hundredth percent):
Purchase Price | Down Payment | Number of monthly payment | Amount financed | Total payments |
$1,800 | $100 | 20 | $1,700 | $1,900 |
Amount Financed = $1,800 - $100 = $1,700;
Finance Charge = $1,900 - $1,700 = $200;
$200/$1,700 = $.117647 × 100 = $11.76;
Go to Table 14-1 = 13%.
Difficulty: 2 Medium
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (2) Calculate the estimated APR by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
50) Calculate the average daily balance (assume a 30-day billing cycle):
4/20 Billing Date Previous Balance $700
4/26 Payment $200
4/30 Charge $400
5/4 Payment $150
5/12 Cash Advance $180
$23,240/30 = $774.67.
Date | Category | New Amount | Days at Balance | Bal × Days |
4/20 | Prev Bal | $700 | 6 | $4,200 |
4/26 | Payment | $500 | 4 | $2,000 |
4/30 | Charge | $900 | 4 | $3,600 |
5/4 | Payment | $750 | 8 | $6,000 |
5/12 | Cash Adv | $930 | 8 | $7,440 |
Totals: | 30 | $23,240 |
Difficulty: 2 Medium
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
51) Joyce Reed bought a used Jeep for $13,500. She put down $2,000 and paid $220 monthly for 60 months. What is the amount of finance charge Joyce will pay?
$220 × 60 = $13,200 - $11,500 = $1,700.
Difficulty: 3 Hard
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
52) Bill Moore bought a stereo selling for $5,800, putting down $1,200. The payment schedule was for 48 monthly payments of $117.50. What is the APR by table lookup?
Amount Financed = $5,800 - $1,200 = $4,600; Finance Charge = $117.50 × 48 - $4,600 = $1,040; $1,040/$4,600 = $.22608 × 100 = $22.609 (10.25% to 10.5%).
Difficulty: 3 Hard
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (2) Calculate the estimated APR by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
53) Joanne Revis bought a home computer for $1,299. She plans to pay $300 per month till the purchase is paid off. Assume there is a 
interest charge on the unpaid balance and the U.S. Rule is used. What is the outstanding balance due at the end of the first month?
$1,299 × .015 = $19.485; $300 - $19.485 = $280.51; $1,299.00 - $280.51 = $1,018.49.
Difficulty: 3 Hard
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
54) Pete Sole bought a used car for $8,000. Pete put down $2,000 and financed the balance at 
for 60 months. What is his monthly payment? (Use the loan amortization table.)
($6,000/$1,000) × $21.49 = $128.94.
Difficulty: 3 Hard
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (3) Calculate the monthly payment by formula and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
55) Vicki King bought a Ford Explorer for $23,000. Vicki made a down payment of $6,000 and paid $305 monthly for 60 months. What is the total finance charge that Vicki paid at the end of 60 months?
($305 × 60) - $17,000 = $1,300.
Difficulty: 3 Hard
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
56) Pete Size read the following partial advertisement: Price $20,999; down payment $1,000; cash or trade; $390.85 per month for 60 months. Calculate (A) the total finance charge and (B) the APR by table lookup.
A. $390.85 × 60 - $19,999 = $3,452; B. $3,452/$19,999 × $100 = $17.26; between 6.25% and 6.5%.
Difficulty: 3 Hard
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.; 14-01 (2) Calculate the estimated APR by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
57) Marika Katz bought a $7,000 computer. Based on her income, Marika could afford to pay back only $700 per month. The charge on the unpaid balance is . The U.S. Rule is used in the calculation. Calculate the balance outstanding after the second month.
Month | Monthly Balance Due | Interest | Monthly Payment | Reduction in Balance | Balance Outstanding |
1 | 7,000 | 7,000 × .015 = $105 | $700 | 700 - 105 = $595 | 7,000 - 595 = $6,405 |
2 | 6,405 | .015 × 6,405 = $96.08 | $700 | 700 - 96.08 = $603.92 | 6,405 - 603.92 = $5,801.08 |
Difficulty: 3 Hard
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Analyze
Type: Static
Accessibility: Keyboard Navigation
58) Calculate average daily balance:
29 Day Billing Cycle
9/6 Balance $600
9/18 Payment $200
9/24 Charge $300
$17,300/29 = $596.55.
Date | Category | New Amount | Days at Balance | Bal × Days |
9/6 | Prev Bal | $600 | 12 | $7,200 |
9/18 | Payment | $400 | 6 | $2,400 |
9/24 | Charge | $700 | 11 | $7,700 |
Totals: | 29 | $17,300 |
Difficulty: 2 Medium
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
59) Mel Blanc bought a new dining room set for $6,600. Mel put down $1,000 and financed the balance at 12% for 36 months. Using the loan amortization table, what is his monthly payment?
$6,600 - $1,000 = $5,600, Table 14-2, $5,600/$1,000 × $33.21 = $185.98.
Difficulty: 3 Hard
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (3) Calculate the monthly payment by formula and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
60) Calculate the finance charge:
Sofa purchase price | Down Payment | Number of monthly payments | Amount of monthly payment |
$1,500 | $200 | 12 | $175 |
12 × $175 = $2,100; $2,100 - ($1,500 - $200) = $800.
Difficulty: 2 Medium
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
61) Calculate the finance charge:
Laptop purchase price | Down Payment | Number of monthly payments | Amount of monthly payment |
$1,800 | $300 | 16 | $185 |
16 × $185 = $2960; $2,960 - ($1,800 - $300) = $1,460.
Difficulty: 2 Medium
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
62) Calculate the monthly payment by using the loan amortization table:
Loan $26,000
Down Payment $5,000
Time 36 months
Rate 11%
Table 14-2; $26,000 - $5,000 = $21,000; $21,000/$1,000 × $32.74 = $687.54.
Difficulty: 2 Medium
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (3) Calculate the monthly payment by formula and by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
63) Calculate the monthly payment by using the loan amortization table:
Loan $8,500
Down Payment $2,000
Time 48 months
Rate 10.5%
Table 14-2; $8,500 - $2,000 = $6,500; $6,500/$1,000 × $25.60 = $166.40.
Difficulty: 2 Medium
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (3) Calculate the monthly payment by formula and by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
64) Calculate APR by table lookup:
Purchase Price | Down Payment | Number of monthly payments | Amount financed | Total Payment |
$3,000 | $75 | 44 | $2,925 | $3,950 |
Table 14-1; $3,950 - $2,925 = $1,025; ($1,025/$2,925) × $100 = $35.04; between 16.75% and 17%.
Difficulty: 2 Medium
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (2) Calculate the estimated APR by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
65) Calculate APR by table lookup:
Purchase Price | Down Payment | Number of monthly payments | Amount financed | Total Payment |
$5,950 | $150 | 40 | $5,800 | $6,900 |
Table 14-1; $6,900 - $5,800 = $1,100; ($1,100/$5,800) × $100 = $18.97; between 10.5% and 10.75%.
Difficulty: 2 Medium
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (2) Calculate the estimated APR by table lookup.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
66) Able Long buys a new desk for $2,400. Able will pay back $250 per month. Monthly interest is 3% on the unpaid balance. Calculate the balance outstanding after the second payment. (Use the U.S. Rule.)
Month | Monthly Balance Due | Interest | Monthly Payment | Reduction in Balance | Balance Outstanding |
1 | $2,400 | 2,400 × .03 = $72 | $250 | 250 - 72 = $178 | 2,400 - 178 = $2,222 |
2 | $2,222 | 2,222 × .03 = $66.66 | $250 | 250 - 66.66 = $183.34 | 2,222 - 183.34 = $2038.66 |
Difficulty: 3 Hard
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Analyze
Type: Static
Accessibility: Keyboard Navigation
67) Earl Miller buys a new desk for $2,600. Miller will pay back $270 per month. Monthly interest is 5% on the unpaid balance. Calculate the balance outstanding after the second payment. (Use the U.S. Rule.)
Month | Monthly Balance Due | Interest | Monthly Payment | Reduction in Balance | Balance Outstanding |
1 | $2,600 | 2,600 × .05 = $130 | $270 | 270 - 130 = $140 | 2,600 - 140 = $2,460 |
2 | $2,460 | 2,460 × .05 = $123 | $270 | 270 - 123 = $147 | 2,460 - 147 = $2,313 |
Difficulty: 3 Hard
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Analyze
Type: Static
Accessibility: Keyboard Navigation
68) Calculate the finance charge:
Loan $16,500
Months of loan 36
Monthly payment $535.00
36 × $535 = $19,260; $19,260 - $16,500 = $2,760.
Difficulty: 2 Medium
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Understand
Type: Static
Accessibility: Keyboard Navigation
69) Calculate (A) the average daily balance and (B) the finance charge, if finance charge is 1% on the average daily balance.
30 Day Billing Cycle
4/20 Prev Balance $800
4/27 Payment $100
4/30 Charge $300
5/9 Payment $50
5/12 Cash Adv $200
A. $28,750 / 30 = $958.33; B. $958.33 × .01 = $9.5833 = $9.58.
Date | Category | New Amount | Days at Balance | Bal × Days |
4/20 | Prev Bal | $800 | 7 | $5,600 |
4/27 | Payment | 800 - 100 = $700 | 3 | $2,100 |
4/30 | Charge | 700 + 300 = $1,000 | 9 | $9,000 |
5/9 | Payment | 1,000 - 50 = $950 | 3 | $2,850 |
5/12 | Cash Adv | 950 + 200 = $1,150 | 8 | $9,200 |
Totals: | 30 | $28,750 |
Difficulty: 3 Hard
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
70) Calculate (A) the average daily balance and (B) the finance charge if finance charge is 2 % on average daily balance.
29 Day Billing Cycle
11/20 Prev Balance $1,000
11/27 Payment $200
11/30 Charge $150
12/9 Payment $250
12/14 Cash Adv $400
A. $26,950 / 29 = $929.31; B. 929.31 × .02 = $18.59.
Date | Category | New Amount | Days at Balance | Bal × Days |
11/20 | Prev Bal | $1,000 | 7 | $7,000 |
11/27 | Payment | 1,000 - 200 = $800 | 3 | $2,400 |
11/30 | Charge | 800 + 150 = $950 | 9 | $8,550 |
12/9 | Payment | 950 - 250 = $700 | 5 | $3,500 |
12/14 | Cash Adv | 700 + 400 = $1,100 | 5 | $5,500 |
Totals: | 29 | $26,950 |
Difficulty: 3 Hard
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
71) Neal Selznick bought a new van for $10,000. Neal put down $1,000 and paid $275 monthly for 40 months. What is the total amount of finance charge that Neal paid at the end of 40 months?
$275 × 40 - ($10,000 - $1,000) = $11,000 - $9,000 = $2,000.
Difficulty: 3 Hard
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
72) Jennifer Rick buys a new typewriter for $590. Jennifer puts 20% down and will pay $70 a month for the next 10 months. What is (A) the amount of the loan, (B) the total amount of monthly payments, and (C) the total of the finance charge?
A. $590 - $118 = $472; B. 10 × $70 = $700; C. $700 - $472 = $228.
Difficulty: 3 Hard
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (1) Calculate the amount financed, finance charge, and deferred payment.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
73) Mary Jones just received the following statement. Can you help her calculate (A) the average daily balance and (B) the finance charge, if finance charge is 1 ½% on the average daily balance?
29 Day Billing Cycle
3/17 Prev Balance $2,000
3/28 Payment $100
4/3 Charge $300
A. $59,800 / 29 = $2,062.07; B. $2062.07 × .015 = $30.93.
Date | Category | New Amount | Days at Balance | Bal × Days |
3/17 | Prev Bal | $2,000 | 11 | $22,000 |
3/28 | Payment | 2,000 - 100 = $1,900 | 6 | $11,400 |
4/3 | Charge | 1,900 + 300 = $2,200 | 12 | $26,400 |
Totals: | 29 | $59,800 |
Difficulty: 3 Hard
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
74) Jane Ranch bought a tractor for $5,000. Jane has decided that she can afford to pay only $1,000 per month. Can you calculate at the end of month 2 the balance of the loan outstanding? Use the U.S. Rule. The monthly interest charged is 5% on the unpaid balance.
Month | Monthly Balance Due | Interest | Monthly Payment | Reduction in Balance | Balance Outstanding |
1 | $5,000 | 5,000 × .05 = $250 | $1,000 | 1,000 - 250 = $750 | 5,000 - 750 = $4,250 |
2 | $4,250 | 4,250 × .05 = $212.50 | $1,000 | 1,000 - 212.50 = $787.50 | 4,250 - 787.50 = $3,462.50 |
Difficulty: 3 Hard
Topic: LU 14-02 Revolving Charge Credit Cards
Learning Objective: 14-02 (1) Calculate the finance charges on revolving charge credit card accounts.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
75) Calculate APR by table given the following:
Maytag refrigerator: $5,000
Down payment: $200
Amount financed: $4,800
Total of payments: $6,900
Number monthly payments 60
Table 14-1, $6,900 - $4,800 = $2,100; $2,100 / $4,800 × $100 = $43.75; intersection on Table is 15.25% - 15.5%.
Difficulty: 3 Hard
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (2) Calculate the estimated APR by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
76) Pete Frank bought a computer for $4,000. Pete put down $500 and financed the balance at 10 ½% for 36 months. What is his monthly payment? (Use loan amortization table.)
Table 14-2, $4,000 - $500 = $3,500; $3,500 / $1,000 × $32.50 = $113.75
Difficulty: 3 Hard
Topic: LU 14-01 Cost of Installment Buying
Learning Objective: 14-01 (3) Calculate the monthly payment by formula and by table lookup.
Bloom's: Apply
Type: Static
Accessibility: Keyboard Navigation
Document Information
Connected Book
Business Math Procedures 13e Test Bank with Answers
By Jeffrey Slater