5: Unit Consumer Credit Instructor Graded Project
***You must show your work on all problems. You may type your answer right into this
document.
***Total points for project: 45 points.
***Projects must be submitted as a Microsoft Word document and uploaded to the Drop
Box for Unit 5.
***All Projects are due by Tuesday at 11:59 PM ET of the assigned Unit.
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the project problems should be addressed to the instructor by sending an email or by
attending office hours.
NOTE:
Part I. Basic Computations
1.
TheMorrisonfamilyboughtacarfor$24,000waswhichwasfinancedat$600permonthfor40
months.Thedownpaymentwas$5000.
a.
WhatistheInstallmentPrice?(5Points)
Answer:
TotalInstallmentpayment=40x$600=$24,000
InstallmentPrice=$24,000+$5,000=$29,000
b.
Whatisthefinancialchargeandamountfinanced?(5Points)
Answer:
Financecharge=$29,000,$24,000=$5,000
Amountfinanced=$24,000$5,000=$19,000
2.JasonscreditcardsbeginningunpaidbalanceforAugustis$3,000.DuringtheAugustbillingcyclehe
madeapaymentof$250andusedcardtopurchase$75worthofgroceries.Creditcardcharges23%
annualpercentagerateandusestheunpaidbalancemethod.
a.
WhatisthefinancechargeattheendofAugust?(5Points)
Answer:
Monthlyinterestrate=0.23/12=0.019
Tofindthefinancechargeforthemonthofwemultiplythebeginningunpaidbalancebythe
monthly
interestrate.Financecharge=$3,000*0.019=$57
b. WhatisthenewbalanceattheendofAugust?(5Points)
Answer:
NewbalanceattheendoftheMonth=Previousmonthsunpaidbalance+Financecharge+
Purchasesandcashadvancespaymentsandcredits
NewbalanceattheendoftheMonth=$3,000+$57+$75$250
NewbalanceattheendoftheMay=$2,882
Part II. Case Study
1. Ling has received been approved for a Visa credit card with a $2000 credit limit, however he
has not charged that much since opening the account. On April 24, he discovers a monthly
statement from March that had accidentally slid down between his desk and the wall.
Because he has been busy at work, he has not had time to carefully review his monthly
statements, but is spending the weekend catching up on paying bills and organizing his
desk. He is particularly interested in how much he still owes the credit card company.
He reviews the statement and discovers there is a page missing the one with the unpaid
balance. He can see that his beginning balance for March (March 1 through March 31) was
$800 and that he paid $280 March on 12, charged purchases of $150 on March 5, $100 on
March 20, and $50 on March 30. Ling remembers that the Annual Percentage Rate (APR)
on the credit card is 16% of the unpaid balance and interest is charged using the average
daily balance method, including current purchases.
(5 points) Find the unpaid balance for the March statement (before interest was
charged).
Answer:
a.
Balance
$800
$800
$150
$950
($280)
$670
$100
$770
$50
$820
1-Mar Beginning Balance
5-Mar Purchase
12-Mar Payment
20-Mar Purchase
30-Mar Purchase
$800 $280 (payment) + $150 (3/5 charge) +$100 (3/20 charge) + $50 (3/30
charge) = $820
b. (5 points) Find the average daily balance for the month of March (assume 31
days):
Answer:
Average daily balance is $791.94
March 1-4
March 5-11
March 12-19
March 20 29
March 30 31
Total Sum
Average Daily Balance
= Total sum / 31 days
c.
# of days
4 days
7 days
8 days
10 days
2 days
31 days
Balance Partial Sum
$3,200
$800
$6,650
$950
$5,360
$670
$7,700
$770
$1,640
$820
$24,550
$791.94
(5points)CalculatehowmuchinterestLingmustpayinadditiontotheminimumpayment.
Answer:
FinanceCharge=AverageDailybalance*InterestRate
Interest=$791.94*(0.16/12)=$10.56
d.
(10 points) Research some of the guidelines for obtaining and using a credit
card for personal purchases. Do you think that Ling is using his credit card wisely?
Answers will vary
Requirements
- Write your essay in this document do not save it in a separate file.
- You must clearly state your position with well-structured paragraphs
using proper grammar, spelling, and sentence structure.
- This is not an opinion question you must offer evidence to support
your position, using properly-cited sources
- Your answer must be between 150-250 words (about 1 page of text)
- You must cite at least one source (book, website, periodical) using
APA format.
- Do not use unreliable sources such as Wikipedia, and Yahoo!
Answers.
Answer:
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