Ch5_Tutorial answer - CCN1021 Personal Financial Planning Suggested Solution-Chapter 5 Consumer Credit Question 1 Close end credit It is a one-time loan

# Ch5_Tutorial answer - CCN1021 Personal Financial Planning...

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CCN1021 Personal Financial Planning Suggested Solution-Chapter 5: Consumer Credit Question 1 Close end credit. It is a one-time loan that the borrower pays back in a specified period of time and in payments of equal amounts. Question 2 Paying the minimum payment will take much longer to repay the balance. The longer the time to repay the balance, the more interest that must be paid. Reference: - corner/p8a3.jpg Question 3 APR Length of Loan Monthly Payment Total Finance Charge Total Cost Creditor X 8% 3 years \$2506.91 \$10,248.76 \$90,248.76 Creditor Y 8.5% 4 years \$1971.86 \$14,649.28 \$94,649.28 Creditor Z 9% 5 years \$1660.67 \$19,640.2 \$99,640.2 If the primary concern is lowest cost, Creditor X meets this criterion. The lowest monthly payment is with Creditor Z; however, the total cost is much higher, and it takes longer to pay back this loan. Question 4a Cash price = \$10,000 Down payment = \$2,000 Amount of the loan = \$8,000 Length of the loan = 4 years or 48 months