1. Dave borrowed $950 for one year and paid $52.50 in interest. The bank charged him a $4.50 service charge. What is the finance charge on this loan?

2. Rebecca wants to buy a new saddle for her horse. The one she wants usually costs $600, but this week it is on sale for $550. She does not have $550, but she could buy it with $60 down and pay the rest in 6 months with 9 percent interest. How much will Rebecca save by buying the saddle this week?

3. You can buy an item for $135 on a charge with the promise to pay $135 in 90 days. Suppose you can buy an identical item for $132 cash. If you buy the item for $135, you are in effect paying $3 for the use of $132 for three months. What is the effective annual rate of interest? Ignore interest rate compounding.

4. Dave borrowed $600 on January 1, 2006. The bank charged him a $5.00 service charge and interest was $44.20. He paid the $600 in 12 equal monthly payments, what was the APR?

5. Sidney took a $200 cash advance by using checks linked to her credit card account. The bank charges a 3 percent cash advance fee on the amount borrowed and offers no grace period on cash advances. Sidney paid the balance in full when the bill arrived.

(a) |
What was the cash advance fee? (Omit the $ sign in your response.) |

Cash advance fee | $ 6 |

(b) |
What was the interest for one month at an 12 percent APR? (Omit the $ sign in your response.) |

Interest | $ |

(c) |
What was the total amount she paid? (Omit the $ sign in your response.) |

Total amount |

What are the interest cost and the total amount due on a six-month loan of $1,800 at 14.4 percent simple annual interest?

Interest cost | $ |

Total amount due |

After visiting several automobile dealerships, Richard selects the used car he wants. He likes its $13,900 price, but financing through the dealer is no bargain. He has $2,500 cash for a down payment, so he needs an $11,400 loan. In shopping at several banks for an installment loan, he learns that interest on most automobile loans is quoted at add-on rates. That is, during the life of the loan, interest is paid on the full amount borrowed even though a portion of the principal has been paid back. Richard borrows $11,400 for a period of four years at an add-on interest rate of 10 percent.

What is the total interest on Richards loan? (Do not round your intermediate calculations. Round your answer to the nearest dollar amount. Omit the $ sign in your response.) |

Total interest | $ |

(b) |
What is the total cost of the car? (Do not round your intermediate calculations. Round your answer to the nearest dollar amount. Omit the $ sign in your response.) |

Total cost | $ |

(c) |
What is the monthly payment? (Do not round your intermediate calculations. Round your answer to 2 decimal places. Omit the $ sign in your response.) |

Monthly payment | $ |

(d) |
What is the annual percentage rate (APR)? (Do not round your intermediate calculations. Round your answer to 2 decimal places. Omit the % sign in your response.) |

Annual percentage rate | % |

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