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   6 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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