Installment Buying and Credit Cards. Simple Finance Charges The finance charge is the amount of the purchase in excess of the selling price. Barry wants.

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Presentation transcript:

Installment Buying and Credit Cards

Simple Finance Charges The finance charge is the amount of the purchase in excess of the selling price. Barry wants to purchase a tv for $1540. Since he does not have the cash up front, he enter into an agreement to pay $55 a month for 36 months. Find the total cost and the finance charge for this purchase. 55*36=1980. therefore, the finance charge would be then =$440

Monthly Payments A light saber is for sale at a price of $1250, but it may be purchased on an installment plan by paying $300down, and then paying the balance plus 16% simple interest in 12 monthly payments. What would be the amount of each payment?

Using simple interest formula, I = 950*.16*1=$152. So = $1102 is the balance. Since there will be 12 payments, each one should be 1102/12=$91.83 The total cost of the light saber would be the price of $1250 plus the finance charge of 152, or $1402.

Ron Weasly buys a Nimbus 2000 for g450 (g-galleons, currency in the wizard world) and pays for it over two years with 11.5% simple interest. What is the monthly payment. I=450*.115*2= Total amount= = /24=23.06 So the monthly payment is g Except for the last month, the last month payment is g23.12

Credit card and Finance Charges The finance charge on a credit card is the simple interest on the average daily balance using a daily interest rate. The billing cycle is the number of days between credit card statements, and usually corresponds to the number of days in a specific month, which will be 28, 30 or 31 days.

How many days are in the billing cycle that runs from the June 15 through July 14? 30 days. If a credit card has a balance of $20 for 21 days and then a balance of $40 for 9 days, what is the average daily balance for that 30-day period? 20*21=420 and 40*9= =780 ADB: 780/30=$26 ADB- the average daily balance is just that- the average of the daily balances for all the days in the billing cycle.

Daily interest rate: the interest rate stated with a credit card is always an annual percentage rate (APR). Since there are 365 days in a year, the daily interest rate is the APR/365. APR/366

Monthly Finance Charge Monthly Finance Charge = (ADB) * (APR/365)*(# Of Days in Billing Cycle)

Lets say we have an average daily balance of $456 on a credit card with an APR of 12.9%, over a billing period of 31 days. What would be the finance charge be? 456*(.129/365)*31=$5.00 (to the nearest cent)

The balance on the Harry’s credit card on May 12, his billing date, was g For the period ending June 11, he made the following transactions. May 12, Charge : toys, g May 15, Payment: g50.00 May 18, Charge: Clothing, g May 29, Charge: Gasoline, g37.63 A. Find the average daily balance for the billing period. B. Find the finance charge that is due on June 12. Assume APR of 15.6% C. Find the balance that is due on June 12.

Dates# of daysBalance Due#of Days*Balance May 121g May13-142g508.29g May g458.29g May g594.14g May 29-June 1114g631.77g Totals:31g The average daily balance us /31 = g The finance charge is *(.156/365)*31=g7.76 The balance due on June 12 is =g639.53

The balance on Smiths Credit card on November 8, their billing date, was $ For the period ending December 7, they made the following transactions. November 13, charge: toys, $ November 15, Payment: $500 November 29, charge: Clothing, $87.19 Assuming they have an APR of 5.9%, find the balance that is due on December 8.

The average daily balance is $ /30=$ That makes the finance charge *(.059/365)*30=$3.14 Then, the balance forwarded is $ $3.14=$ Dates#of daysBalance due#of days *balance Nov 8-125$812.96$ Nov $ $ Nov $544.06$ Nov29-dec79$631.25$ Totals30$19,451.01

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