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6.1-6.2 Quiz

6.1-6.2 Quiz
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  • 1. Finding the Term of the Loan and Proceeds

    Use the partially completed promissory note for a recreational vehicle (RV) loan. Find the term of the loan and the loan proceeds.

    • Worked-Out Solution

      The term of the loan is 60 months or 5 years.

      The loan proceeds are $100,000.

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     _    _    _    _    _    _      ___      ______  
    | \  / || | || | || | |  | ||   / _ \\   /_____// 
    |  \/  || | || | || | |/\| ||  | / \ ||  `____ `  
    | .  . || | \\_/ || |  /\  ||  | \_/ ||  /___//   
    |_|\/|_||  \____//  |_// \_||   \___//   `__ `    
    `-`  `-`    `---`   `-`   `-`   `---`    /_//     
                                             `-`      
    
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  • 2. Finding the Monthly Payment

    Use the partially completed promissory note for a recreational vehicle (RV) loan. What is the monthly payment?

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     _____     __   __    _____    __   __    ______  
    |  __ \\   \ \\/ //  /  ___||  \ \\/ //  /_____// 
    | |  \ ||   \ ` //  | // __     \ ` //   `____ `  
    | |__/ ||    | ||   | \\_\ ||    | ||    /___//   
    |_____//     |_||    \____//     |_||    `__ `    
     -----`      `-`'     `---`      `-`'    /_//     
                                             `-`      
    
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  • 3. Finding the Amount Due and Cost of Credit

    Use the partially completed promissory note for a recreational vehicle (RV) loan. Find the total amount due and the cost of credit.

    • Worked-Out Solution

      The monthly payment is

      This implies that the total paid during the 5 years is

      So, the cost of credit is

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     _    _      ___      _____    __   __            
    | |  | ||   / _ \\   / ____||  \ \\/ //     ___   
    | |/\| ||  / //\ \\ / //---`'   \ ` //     /   || 
    |  /\  || |  ___  ||\ \\___      | ||     | [] || 
    |_// \_|| |_||  |_|| \_____||    |_||      \__ || 
    `-`   `-` `-`   `-`   `----`     `-`'       -|_|| 
                                                 `-`  
    
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  • 4. Last Payment

    Use the partially completed promissory note for a recreational vehicle (RV) loan. The first payment is due March 1, 2011. When is the last payment due?

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     _    _     ______   ______     _____    _____    
    | |  | ||  /_   _// |      \\  |  ___|| |  __ \\  
    | |/\| ||   -| ||-  |  --  //  | ||__   | |  \ || 
    |  /\  ||   _| ||_  |  --  \\  | ||__   | |__/ || 
    |_// \_||  /_____// |______//  |_____|| |_____//  
    `-`   `-`  `-----`  `------`   `-----`   -----`   
                                                      
    
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  • 5. Remaining Balance

    The graph shows the decreasing balance of the loan. When is the remaining balance about one-fourth of the original loan amount?

    • Worked-Out Solution

      From the graph, it appears that the balance of the loan will be about $25,000 (a quarter of the original amount) after 47 payments.

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     _    _      ___      ______   _    _     _____   
    | \  / ||   / _ \\   /_____// | || | ||  |__  //  
    |  \/  ||  / //\ \\  `____ `  | || | ||    / //   
    | .  . || |  ___  || /___//   | \\_/ ||   / //__  
    |_|\/|_|| |_||  |_|| `__ `     \____//   /_____|| 
    `-`  `-`  `-`   `-`  /_//       `---`    `-----`  
                         `-`                          
    
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  • 6. Automatic Monthly Payments

    The credit union offers Raja a 0.25% reduction in the APR by initiating automatic monthly payments from his checking account. How much does he save over the term of the loan by doing this?

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      _____    __   __   _    _      ___      _____   
     |__  //   \ \\/ // | \  / ||   / _ \\   |__  //  
       / //     \ ` //  |  \/  ||  | / \ ||    / //   
      / //__     | ||   | .  . ||  | \_/ ||   / //__  
     /_____||    |_||   |_|\/|_||   \___//   /_____|| 
     `-----`     `-`'   `-`  `-`    `---`    `-----`  
                                                      
    
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