Ron Larson
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6.1 Introduction to Lending

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

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     _    _      ___                 ___      _  __  
| || | ||   / _ \\    ____      / _ \\   | |/ // 
| || | ||  | / \ ||  |    \\   / //\ \\  | ' //  
| \\_/ ||  | \_/ ||  | [] ||  |  ___  || | . \\  
 \____//    \___//   |  __//  |_||  |_|| |_|\_\\ 
  `---`     `---`    |_|`-`   `-`   `-`  `-` --` 
                     `-`
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    system user
    Guest   4 years ago |
    kebun
    0
    system user
    John Bennett   5 years ago |
    I get a different amount for the Finance charges if I use the simple interest formula than I do if I multiply the payment by the months and subtract the Amount Financed. Should these be same?
    0
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