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Week 9 Discussion

# Week 9 Discussion - ACE 245 Discussion Section Week 9 Goals...

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ACE 245 Discussion Section – Week 9 Goals: Prepare students for homework exercise 4, largely about credit. 1. Anisha’s gross annual income is \$35,000. Her after-tax income is \$29,500. What is the maximum recommended amount she should be devoting to monthly consumer credit payments? [Hint: Check out the recommended debt-safety ratio.] a. \$385 b. \$468 c. \$492 [Chap 6 says debt-safety ratio should be < 20% of take home pay. d. \$527 (0.2 * 28,800) / 12 = \$480] e. \$600 2. What would be the final payment for a \$10,000 single-payment loan issued for 6 months charging simple interest at APR 12%? (Round to nearest dollar) 10,000 + (0.12 / 2)*10,000 = 10,600 3. Judy has arranged a loan of \$2,500 for which she will pay \$300 up-front and return the \$2,500 at the end of one year. What type of loan is this and what is the effective annual interest rate? Discount loan. \$2500 / (\$2500 – 300) = 1.136 interest rate of 13.6% 4. What is the effective annual rate of interest on a loan of \$2000 due in three months where

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Week 9 Discussion - ACE 245 Discussion Section Week 9 Goals...

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