### 6.1 Introduction to Lending

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• 7. Lobstering

A fisherman makes purchases for a lobster trapping business. Find the cost of credit for the loan. (See Example 3.)

The fisherman purchases lobster buoys and paint online for \$500. The website offers an installment loan that allows him to pay by making 3 equal monthly payments of \$172.25.

• Worked-Out Solution

The total amount paid by the fisherman is

Because the principal of the loan was \$500, the cost of credit is \$16.75.

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```  _____      ___      ______   _    _     _  _
|__  //    / _ \\   /_   _// | || | ||  | \| ||
/ //    | / \ ||  `-| |,-  | || | ||  |  ' ||
/ //__   | \_/ ||    | ||   | \\_/ ||  | .  ||
/_____||   \___//     |_||    \____//   |_|\_||
`-----`    `---`      `-`'     `---`    `-` -`

```
• 8. Lobstering

A fisherman makes purchases for a lobster trapping business. Find the cost of credit for the loan. (See Example 3.)

The fisherman purchases lobster traps online for \$1440. The website offers an installment loan that allows him to pay by making 12 equal monthly payments of \$127.94.

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```  _____     _____                ___     _____
/ ____||  |  ___||   ____      / _ \\  |  __ \\
/ //---`'  | ||__    |    \\   | / \ || | |  \ ||
\ \\___    | ||__    | [] ||   | \_/ || | |__/ ||
\_____||  |_____||  |  __//    \___//  |_____//
`----`   `-----`   |_|`-`     `---`    -----`
`-`
```
• 9. Lobstering

A fisherman makes purchases for a lobster trapping business. Find the cost of credit for the loan. (See Example 3.)

The fisherman purchases a lobster boat for \$250,000 plus 5% sales tax. The seller offers an installment loan that allows him to pay by making 60 equal monthly payments of \$4988.75.

• Worked-Out Solution

The total principal for the loan is

The total amount paid by the fisherman is

So, the cost of credit is

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``` _    _     ______     _____    _____     ______
| \  / ||  /_   _//   / ___//  |  ___||  /_   _//
|  \/  ||   -| ||-    \___ \\  | ||__    `-| |,-
| .  . ||   _| ||_    /    //  | ||__      | ||
|_|\/|_||  /_____//  /____//   |_____||    |_||
`-`  `-`   `-----`  `-----`    `-----`     `-`'

```
• 10. Cost of Credit

Can you find the cost of credit for the loan in Exercise 1? Exercise 2 ? Explain. (See Example 3 .)

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``` ______     _____    _    _      ___       _____
|      \\  |  ___|| | || | ||   / _ \\    / ___//
|  --  //  | ||__   | || | ||  | / \ ||   \___ \\
|  --  \\  | ||__   | \\_/ ||  | \_/ ||   /    //
|______//  |_____||  \____//    \___//   /____//
`------`   `-----`    `---`     `---`   `-----`

```
• 11. Infrastructure Improvements

A fisherman pays a contractor to repair his dock. The charges are \$1200 for lumber, \$60 for sales tax, and \$750 for labor. The fisherman pays \$260 down and finances the remainder. There is a finance charge of \$41.06. Complete the Truth in Lending disclosure for the loan. (See Example 4.)

• Worked-Out Solution

The completed disclosure is shown below.

Note that the total amount due agrees with the 6 payments.

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```   _____   _    _     _  _      ___      ______
/ ___// | || | ||  | \| ||   / _ \\   /_   _//
\___ \\ | || | ||  |  ' ||  | / \ ||  `-| |,-
/    // | \\_/ ||  | .  ||  | \_/ ||    | ||
/____//   \____//   |_|\_||   \___//     |_||
`-----`     `---`    `-` -`    `---`      `-`'

```
• 12. Infrastructure Improvements

A fisherman borrows \$4500 to put a new roof on his shop. The other charges are \$160. The annual percentage rate is 6%. Complete the Truth in Lending disclosure for the loan. (See Example 4.)

These comments are not screened before publication. Constructive debate about the information on this page is welcome, but personal attacks are not. Please do not post comments that are commercial in nature or that violate copyright. Comments that we regard as obscene, defamatory, or intended to incite violence will be removed. If you find a comment offensive, you may flag it.

``` ______      ___      ______   _    _     ______
|      \\   / _ \\   /_   _// | || | ||  /_____//
|  --  //  | / \ ||  `-| |,-  | || | ||  `____ `
|  --  \\  | \_/ ||    | ||   | \\_/ ||  /___//
|______//   \___//     |_||    \____//   `__ `
`------`    `---`      `-`'     `---`    /_//
`-`
```