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   3 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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