Chapter 4
Lesson 4-1 Introduction to
Consumer Credit
Check Your Understanding (Example 1)
Divide the total cost of the guitar by the amount
Check Your Understanding (Example 2)
Multiply the original cost by 0.2 to get the down
payment. Then add the monthly payment multiplied
(0.2p + 12w) – p or 12w – 0.8p
Check Your Understanding (Example 3)
Check Your Understanding (Example 4)
Subtract the points her score was lowered, x, from
Applications
1. Borrowing money is a tremendous responsibility;
it ties up future income, and sometimes
2. Multiply the purchase price by 0.15: $4,700 ×
3. Multiply the purchase price by 0.20: $1,420 ×
4a. $1,980 × 0.10 = $198
5a. y × 0.15 = 0.15y
5b. One year is 12 monthly payments.
5c. x × 12 = 12x
5d. Add the down payment and the monthly
payments: 12x + 0.15y.
5e. Subtract the original purchase cost from the
total amount Linda pays: 12x + 0.15y – y, or
12x + 0.85y.
3 = 0.3333 = 33%
33% > 30%
Norton’s Depot has a lower interest rate.
9. Add the down payment and the monthly
10. $100 + $10(17) = $270
$1,670 – $270 = $1,400
11a. The down payment is the purchase price
=D2*F2.
11d. The finance charge is the down payment plus
original purchase price: =C2+G2–A2.
11e. The missing entries (populated by the
spreadsheet formulas) are as follows:
11h. $1,340 × 0.15 = $201
11j. 12(1) = 12
11n. $97.01(12) = $1,164.12
11s. $1,164.12 + $240 – $1,200 = $204.12
11t. $1,706.88 + $175 – $1,750 = $131.88
11u. $1,390.14 + $201 – $1,340 = $251.14
13c. With the layaway plan, you do not receive the
merchandise until payment is made in full. With
the deferred payment plan, you receive the
merchandise immediately.
14. Subtract the down payment and the first 23
15a. $2,100 × 0.10 = $210
16. $69 × 18 = $1,242
17a. $670 × 0.10 = $67
17b. $670 – $67 = $603
17c. $603 × 0.08 = $48.24
17h. $793.69 – $603 – $48.24 = $142.45
18. No. Even if her low credit rating was 620, it
19. He had no credit history and had a low credit
score as a result. He had no proof he could
make timely payments over a period of time.
20. $8,000 – $567.91 + $1,200 – $986.79 – $10
Lesson 4-2 Loans
Check Your Understanding (Example 1)
thousands borrowed, 41, to get the monthly
payment: $19.57 × 41 = $802.37.
Check Your Understanding (Example 2)
Divide the total of the monthly payments by the
$119.52. Look down the 5 yr column and across
$19.92. Divide the monthly payment by the
payment per thousand to find the number of
was borrowed.
Check Your Understanding (Example 3)
Since Karl is borrowing the money over a 3-year
Check Your Understanding (Example 4)
12
12 12
11
12
t
Mr
⎝⎠⎝ ⎠
=
⎛⎞
+−
⎜⎟
⎝⎠
Substitute $1,000 for p, 0.075 for r, and 1 for t.
Applications
1. Borrowing money from a friend can create
2. The highest to lowest interest rate is Columbia,
3. 5-yr loan: 5 × 12 = 60
5a. Monthly payment per $1,000 = $87.80
Number of thousands = 7
$87.80 × 7 = $614.60
5b. Monthly payment per $1,000 = $32.15
5c. Monthly payment per $1,000 = $21.12
6a. Monthly payment per $1,000 = $30.99
7c. $7,303.68 − $6,000 = $1,303.68
$8,700 for p, 0.0931 for r, and 3.5 for t.
11. Use the monthly payment formula and substitute
$15,320 for p, 0.1029 for r, and 2 for t.
11
+−
⎜⎟
$708.99 × 24 = $17,015.76
his desired loan amount by 4 to find the amount
of collateral he needs: 4x.
13. Credit Union:
Monthly payment per $1,000 = $31.45
$251.60 × 36 = $9,057.60
Monthly payment per $1,000 = $32.50
14b. Monthly payment per $1,000 = $47.54
14c. $237.70 × 24 = $5,704.80
16a. Use the monthly payment formula and substitute
$430,000 for p, 0.08 for r, and 30 for t.
()
()
..
$,
.
12 30
12 30
008 008
430 000 1
12 12
008
11
12
M
⎛⎞⎛ ⎞
+
⎜⎟⎜ ⎟
⎝⎠⎝ ⎠
=
⎛⎞
+−
⎜⎟
⎝⎠
= $3,155.19
17b. This is the monthly payment formula:
=(A2*(B2/12)(1+ B2/12^D2)/((1+ B2/12^D2−1).
17c. 12 × 3 = 36
Lesson 4-3 Loan Calculations and
Regression
Check Your Understanding (Example 1)
Use the monthly payment formula and substitute
$18,000 for p, 0.043 for r, and 8 for t.
Check Your Understanding (Example 2)
Use the loan length formula and substitute $25,000
Applications
1. The proverb is a warning about loans and debts.
2. Use the monthly payment formula and substitute
,
$32 000 1
+
⎜⎟⎜ ⎟
3. Use the monthly payment formula and substitute
,
$15 000 1
+
⎜⎟⎜ ⎟
4. Use the monthly payment formula and substitute
$20,000 for p, 0.0575 for r, and 10 for t.
$219.54 × 120 = $26,344.80
5. Stevenson Trust Company:
Substitute $7,000 for p, 0.086 for r, and 8 for t.
()
.
12 8
0 086
M
=
⎛⎞
= $101.10
$101.10 × 96 = $9,705.60
()
.
12 5
010
M
=
⎛⎞
= $148.73
$148.73 × 60 = $8,923.80
6a.
()
.
12
0077
11
t
M
=
⎛⎞
+−
⎜⎟
7. Use the loan length formula and substitute
$20,000 for p, 0.071 for r, and $500 for M.
.
$500 $500 0 071
⎛⎞
⎛⎞⎛
⎞
11e.
Lesson 4-4 Credit Cards
Check Your Understanding (Example 1)
Check Your Understanding (Example 2)
Check Your Understanding (Example 3)
Check Your Understanding (Example 4)
12
⎜⎟
⎝⎠
Applications
x
2. Since the thief used her credit card before she
3. Since Dan was able to report his card stolen
prior to any charges being made, he is not
4a. 12 ÷ 12 = 1%
4b. 15 ÷ 12 = 1.25%
4c. Felix: $800 × 0.01 = $8
5a.
31
= $1,480.78
x
ywdrqmp
x
wrm
+++
+
++ .
100
x
.
7b. To get the annual percentage rate, multiply the
the month, the average daily balance is equal to
9d. 29($712.04) $5,712.04 $878.71
30
+=
10a. $778.19 – $92.19 = $686
10b. $686 – $51 = $635
10c. $635 + $400 = $1,035
10d. $1,035 – $25 = $1,010
12. To express both rates as decimals, divide by
13c. m – x – z – y
13d. m – x – z – y – v
14b. $1,240 × 30 = $37,200
14c. ($1,240 × 20) + ($2,140 × 10) = $46,200
15. 0.12 ÷ 12 = 0.01
0.011 – 0.01 = 0.001
Multiply the increase in the rate by the average
17a. $0, he paid his bill in full the previous month.
will be no finance charges. The average daily
balance is used to calculate finance charges, so
= $199.56 $4,734.60 $5,672.04 $1,160.64
30
+++
Lesson 4-5 Credit Card Statement
Check Your Understanding (Example 1)
The new balance formula is given below.
Check Your Understanding (Example 2)
Check Your Understanding (Example 3)
New Balance = $850 – $560 + $300 + $4.78 + $3
Applications
1. Students are targeted by credit card companies
get them to sign a contract. She wants everyone
2. There are 4 debits on the statement, so
4. The payment due date is June 8.
6. The number of days in the billing cycle is 30.
7. The previous balance is $420.50.
8. $425.36 + $358.33 + $377.11 + $90.20 = $1,251
11. 1.95 × 12 = 23.4%
12a. $2000 ÷ 75 ≈ 26.7; Zea will reach her credit limit
13a. Multiply the average daily balance by the
number of days: WX.
12
⎜⎟
⎝⎠
$5,000 – $1,381.31 = $3,618.69
17. From the credit line, subtract the new balance
18. Use the new balance formula and plug in the
$833.44 = $1,083.44 –
p
Lesson 4-6 Average Daily Balance
Check Your Understanding (Example 1)
The closer the payment is made to the beginning of
be subtracted from the outstanding balance for all
in a lower finance charge.
Applications
1. The quote is a warning about loans and debts.
3. $510.44 × 0.025 = $12.76
5. Daniyar’s finance charge is $0 because he paid
balance.
31
= $999.81
6e. Mark’s finance charge would have been lower
because the average daily balance would be
lower.
7. Since Wade made no additional purchases or
0.02015z.
×
+×+×+×
$420.37 × 0.0165 = $6.94
8c. $421.50 – $100 + $78 + $6.94 = $406.44
8e. Ed’s finance charge would have been lower
5. Use the monthly payment formula and substitute
18a. Use the loan length formula and substitute
14a. Use the monthly payment formula and substitute
= $157.47
= 5.7 years
18b. Use the loan length formula and substitute
$7,500 for p, 0.053 for r, and $148 for M.
⎝⎠
14b. $157.47 × 60 = $9,448.20
calculator to make a scatterplot using the data
points. = 4.8 years
The loan would be for 4.8 years, nine-tenths of a
year less.
y = –3,271x + 54,077.
3 × $1,128.95 = $3,386.85
16c. Enter years 0 through 15 in a graphing
calculator and calculate the quadratic
3 × $1,244.70 = $3,734.10
3 × $1,695.65 = $5,086.95
17. Use the loan length formula and substitute
$20,000 for p, 0.07 for r, and $475 for M.
19e. 19.8% ÷ 12 = 1.65%
19f. $1,855.76 × 0.0165 = $30.62