0Do the Math
1. $165.62 = $150 x 1.1041 (from Appendix A.1)
2. Jimmy will save $480 per year. Saving that amount per year and putting the money in the bank at 2
percent over ten year will yield $5256 = $480 x 10.9497 from Appendix A.3.
30. If Amanda decides to purchase this car, she will be borrowing $21,700 ($24,700 – $3000) and her
finance charges will be $3020 [($515 × 48) – $21,700]. If she leases the car, the capitalized cost
after taking the capitalized cost reduction will be $21,700 ($24,700 – $3000). The dollar cost of
leasing compared with the finance charges of borrowing will be $1630 [($310 × 48) + $350 + $8100
– $21,700]. Therefore, it appears that leasing would be less costly than purchasing for Amanda.
40. Kyle should take the dealer financing. Using the n–ratio APR formula to calculate an adjusted
APR for the dealer financing, it is only 6.45 percent, compared to the 7 percent loan through Kyle’s bank.
(12)[(95 x 48) + 9](1,516) 6.45%
(12 x 48)(48 + 1)[(4 x 26,000) + (3,572)]
CASE 4: Purchase of a New Refrigerator
0. Gary’s best source of research before he buys the refrigerator would be product-testing
magazines, such as Consumer Reports, which analyze products and report facts and figures
related to the quality of each product. Friends and other people who have experience using
similar products can also offer good consumer advice.
0. If Gary buys the basic model for $799 at 12 percent over one year, his monthly payments will
be $71. If Gary buys the higher-priced model, his monthly payment would be $89.
0. Gary’s budget has some room for the lower payment without cutting back too much. To buy
the higher-priced model for $89 monthly, he could cut $30 from his $130 for savings, $20
from his $70 gift category, $10 from personal care, and $20 from his $120 entertainment
category. To cover the extra $9, he might want to cut from any of these four areas.
0. Gary might want to consider making cuts in areas other than saving. As it is now, he is saving
only 6 percent of his salary.
00. CASE 4: A Dispute over New-Car Repairs0
0. Christopher was surely within his rights to take the car back to the dealer for repairs. The car
was still under warranty, and warranties state that a product must perform as it is supposed to
perform. The recurring problem meant that Christopher’s car was not performing to acceptable
standards. With the car still under warranty, the repairs should be corrected by the dealer.
0. Christopher should telephone the automobile’s manufacturer and state the problems he has
encountered with the dealership. He should file a complaint with the manufacturer’s consumer
affairs manager and, if necessary, with the company president or its chief executive office. If
he cannot obtain satisfaction from the manufacturer, the Better Business Bureau may be
helpful in resolving his problem.
0. Christopher could take his complaint to court if all else fails. If the cost of Christopher’s
repairs meets the state’s legal maximum, small claims court would be the place to go. No
attorneys are needed and only minimal fees are required. To file a small-claims action,
