Without knowing anything else about the loan, explain which of the following might be the “principal portion” for payment #23: $121.31 or $120.85. Give reasons. (2 marks) 69. Even though equal regular payments may be set up for a loan, the final payment is usually a different amount. Why does this occur? (2 marks) 70. A $25 000 loan is paid off with monthly payments. Option 1 makes payments of $414.32 for six years if the interest rate is 6% compounded monthly. Option 2 makes payments of $564.47 for four years if the interest rate is 4% compounded monthly. Calculate the amount of interest paid for each option. Give a reason for choosing each option. (5 marks) Now go on to Lesson 19. Do not submit your coursework to ILC until you have completed Unit 4 (Lessons 16 to 20).
MEL3E-B 19 Credit Cards
Mathematics for Everyday Life MEL3E-B Lesson 19, page 1 Copyright © 2008 The Ontario Educational Communications Authority. All rights reserved. Introduction This lesson is about credit cards and credit ratings. You will explore credit card statements and incentive programs. You will see how credit card interest is calculated. You will look at ways you can reduce interest expenses. Finally, you will learn how to establish and maintain a good credit rating. What You Will Learn After completing this lesson, you will be able to • interpret the information on credit card statements • calculate interest charges on credit card balances • calculate the total costs of paying only the minimum payment on a credit card • describe ways of reducing credit card interest charges • analyze the value of credit card incentives • describe the factors that determine a credit rating and the effects of a good or bad credit rating
Lesson 19, page 2 Mathematics for Everyday Life MEL3E-B Copyright © 2008 The Ontario Educational Communications Authority. All rights reserved. Credit Card Statements Think of credit cards as a different kind of loan: a really convenient loan—sometimes too convenient. This convenience may come with a very high cost. If you pay the bill in full by the due date, interest is not an issue. The credit card provider allows a grace period that gives you time to pay the bill in the period between the date of purchase (called the transaction date) and the due date of the bill. However, the bank charges interest if you do not pay the bill in full by the due date. The interest rate is usually very high. The bank charges interest back to the transaction date and the amount is shown on the next month’s statement. When you first get a credit card, you receive a Cardholder Agreement. Few people ever read this in its entirety. However, if you look at the back of your statement, you will likely see key features of your agreement. Every month you will receive a statement that shows your credit card transactions for the previous billing period.
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