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murrcat

Alex purchased a bedroom set for $2,276 using a six-month deferred payment plan with an interest rate of 23.49%. What is the balance after the deferment period if payments of $112 are made each month? $1,604.00 $1,884.74 $2,276.00 $2,556.74

  • 9 months ago
  • 9 months ago

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  1. jim_thompson5910
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    Hint: use A = P(1+r/n)^(n*t)

    • 9 months ago
  2. jim_thompson5910
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    another hint: the monthly payment figure they mention has no affect on the answer (it's put in there to throw you off)

    • 9 months ago
  3. murrcat
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    I know it's not $2556.74

    • 9 months ago
  4. murrcat
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    or C

    • 9 months ago
  5. jim_thompson5910
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    why not?

    • 9 months ago
  6. jim_thompson5910
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    A = P(1+r/n)^(n*t) A = 2276(1+0.2349/12)^(12*0.5) A = 2556.74

    • 9 months ago
  7. murrcat
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    Then I use the same formula as in the other question?

    • 9 months ago
  8. jim_thompson5910
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    no you're done

    • 9 months ago
  9. jim_thompson5910
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    that's the balance after 6 months

    • 9 months ago
  10. jim_thompson5910
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    so you were second-guessing yourself

    • 9 months ago
  11. murrcat
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    That's not the right answer

    • 9 months ago
  12. jim_thompson5910
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    it says 2556.74 is wrong?

    • 9 months ago
  13. murrcat
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    Yeah

    • 9 months ago
  14. jim_thompson5910
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    oooh let me try this

    • 9 months ago
  15. jim_thompson5910
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    oh wait nvm

    • 9 months ago
  16. jim_thompson5910
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    does it say which period after the deferment period ends?

    • 9 months ago
  17. jim_thompson5910
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    like "2 months after the deferment period"?

    • 9 months ago
  18. murrcat
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    Nope

    • 9 months ago
  19. jim_thompson5910
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    well the balance at the 6 month mark is 2556.74 if no payments are made during that 6 month window

    • 9 months ago
  20. jim_thompson5910
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    let's see what happens when payments of $112 are made instead

    • 9 months ago
  21. murrcat
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    What is the balance after the deferment period if payments of $112 are made each month?

    • 9 months ago
  22. murrcat
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    I think it's $1884.74 because if you multipy 112 by 6 months you get that answer

    • 9 months ago
  23. jim_thompson5910
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    one sec

    • 9 months ago
  24. murrcat
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    ok

    • 9 months ago
  25. jim_thompson5910
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    hmm not sure why, but the closest I'm getting is 1850.99, but that's nowhere near $1884.74

    • 9 months ago
  26. jim_thompson5910
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    I wonder if it's implying that the interest is added after the payment is made

    • 9 months ago
  27. murrcat
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    Not so sure, I'll just go with $1,884.74

    • 9 months ago
  28. murrcat
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    Sakura purchased ski equipment for $1,248 using a six-month deferred payment plan. The interest rate after the introductory period is 23.79%. A down payment of $175 is required as well as a minimum monthly payment of $95. What is the balance at the beginning of the seventh month if only the minimum payment is made during the introductory period? A. $1,112.13 B. $637.13 Do you know which this one would be? I got $637.13 but i'm not to sure

    • 9 months ago
  29. jim_thompson5910
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    the down payment of 175 means only 1248-175 = 1,073 is financed

    • 9 months ago
  30. jim_thompson5910
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    one sec

    • 9 months ago
  31. jim_thompson5910
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    so that's the only two choices?

    • 9 months ago
  32. murrcat
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    No there were two more but those were wrong

    • 9 months ago
  33. jim_thompson5910
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    ok nvm that then

    • 9 months ago
  34. jim_thompson5910
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    I'm guessing the interest rate for the introductory period is not given or is it 0%?

    • 9 months ago
  35. murrcat
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    Not given

    • 9 months ago
  36. jim_thompson5910
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    hmm this is a tough one because you can choose not to pay during the deferment period (which I'm assuming is also the introductory period) but I'm trying various scenarios out and I'm not getting anything close I wish they would spell the process out clearer is there an example from the lesson we could use?

    • 9 months ago
  37. jim_thompson5910
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    if so please post it thanks

    • 9 months ago
  38. murrcat
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    No I looked through the lesson and everything was pretty crappy just like all these questions being given from this pretest

    • 9 months ago
  39. jim_thompson5910
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    hmm makes me wish I could read your book/lesson alongside you I'm ok at finance, but stuff like this is making me think otherwise lol

    • 9 months ago
  40. murrcat
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    hmmm

    • 9 months ago
  41. murrcat
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    would you know how to do this one?

    • 9 months ago
  42. murrcat
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    Elliot is graduating from college in six months, but he will need a loan in the amount of $4,850 for his last semester. He may either receive an unsubsidized Stafford Loan with an interest rate of 6.8%, compounded monthly, or his parents may get a PLUS Loan with an interest rate of 7.8%, compounded monthly. The Stafford Loan has a grace period of six months from the time of graduation. Which loan will have a higher balance and by how much at the time of repayment? The PLUS Loan has a higher balance by $51.84. The Stafford Loan has a higher balance by $327.01. The Stafford Loan has a higher balance by $148.03. The PLUS Loan has a higher balance by $259.64.

    • 9 months ago
  43. murrcat
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    I'll show you what i did first

    • 9 months ago
  44. murrcat
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    Stafford Loan F = 4850*(1 + 0.068/12)^6 = 5017.25 PLUS Loan F = 4850*(1 + 0.078/12)^6 = 5042.25 Difference PL - SL = 5042.25 - 5017.25 = 28 but 28 isn't in any of the options

    • 9 months ago
  45. murrcat
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    F = L(1 + r/n)^nt F = Future Value L = Initial Loan r = Interest Rate in Decimal Form n = Number of Compounding Periods Per Year (intra-annual) t = Number of Years Loaned

    • 9 months ago
  46. jim_thompson5910
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    ok let me try it out

    • 9 months ago
  47. jim_thompson5910
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    Stafford Loan F = P(1+r/n)^(n*t) = 4850*(1 + 0.068/12)^(12*12/12) = 5,190.28 PLUS Loan F = P(1+r/n)^(n*t) = 4850*(1 + 0.078/12)^(12*6/12) = 5,042.25 Difference 5,190.28 - 5,042.25 = 148.03

    • 9 months ago
  48. jim_thompson5910
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    you forgot to do n*t in the exponent you just did t in the exponent

    • 9 months ago
  49. murrcat
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    oooooooh

    • 9 months ago
  50. jim_thompson5910
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    also, t is in years, so 6 months = 6/12 years 1 year = 12/12 months

    • 9 months ago
  51. murrcat
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    Alright, thanks so much!

    • 9 months ago
  52. jim_thompson5910
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    so The Stafford Loan has a higher balance by $148.03. yw

    • 9 months ago
  53. murrcat
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    Theres one more question I need help with, or are you annoyed of this?

    • 9 months ago
  54. jim_thompson5910
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    if i don't understand it, i get a bit frustrated lol but it's all in the learning process

    • 9 months ago
  55. jim_thompson5910
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    that last one wasn't so bad since it was definitely more straight-forward

    • 9 months ago
  56. jim_thompson5910
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    I wish I knew how to solve that second to last one though, which is why I wanted to see how the lesson would do it (to see an example)

    • 9 months ago
  57. murrcat
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    Shanelle purchased a dining room set for $2,620 using a 12-month deferred payment plan with an interest rate of 19.49%. She did not make any payments during the deferment period. What will the total cost of the dining room set be if she must pay off the dining room set within two years after the deferment period? $2,620.00 $3,864.00 $5,796.00 $3,178.82

    • 9 months ago
  58. murrcat
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    I think this is kinda like the question we could not figure out

    • 9 months ago
  59. jim_thompson5910
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    a bit but this one is more clear though, it says "She did not make any payments during the deferment period"

    • 9 months ago
  60. jim_thompson5910
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    A = P(1+r/n)^(n*t) A = 2620(1+0.1949/12)^(12*1) A = 3178.82 note: this is NOT the answer and a lot of people think it is (which is why this trap is thrown in here). This value is used to find the final answer.

    • 9 months ago
  61. jim_thompson5910
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    3178.82 is the balance after the 12 month deferment period let's use this to find the monthly payment Use the formula P = L((r/n)*(1 + r/n)^(n*t))/((1 + r/n)^(n*t) - 1) where, P = monthly payment L = total amount loaned or amortized r = annual interest rate (APR) n = number of times interest is compounded per year (compounding frequency) t = time in years In this case, P = unknown (we're solving for this) L = 3178.82 r = 0.1949 (19.49% = 19.49/100 = 0.1949) n = 12 t = 2 P = L((r/n)*(1 + r/n)^(n*t))/((1 + r/n)^(n*t) - 1) P = 3178.82((0.1949/12)*(1 + 0.1949/12)^(12*2))/((1 + 0.1949/12)^(12*2) - 1) P = 160.99771204627 P = 161 So we know Payment per period: P = $161 Number of periods: n*t = 12*2 = 24 Total Amount Paid = (Payment per period)*(Number of periods) = ($161)*(24) = $3864 Total Cost is $3864.00

    • 9 months ago
  62. murrcat
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    Thank you so much! I submitted it now and the Sakura one was 637.13

    • 9 months ago
  63. jim_thompson5910
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    thanks, I'll have to go back over that and think how they got that

    • 9 months ago
  64. jim_thompson5910
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    oh what was the answer to "Alex purchased a bedroom set for..." I don't think we got that either...hmm

    • 9 months ago
  65. murrcat
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    It was $1,884.74

    • 9 months ago
  66. jim_thompson5910
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    Ok I figured it out. Here's how it works. The rules are that if you pay off the entire balance (this is a big IF), then NO interest will apply. So if you manage to pay off the entire balance of $2,276 within 6 months (the deferred interest period), then you will be charged NO interest at all. However, companies know very well that the majority of the people will not be able to pay off the entire balance within 6 months. So this is when they retroactively charge interest to make a lot of money. So Alex could have made payments to fully pay off the $2,276 debt within 6 months...BUT...Alex made payments of $112 for 6 months, which means he really only paid 6*112 = 672 dollars toward the balance and he's nowhere close to paying off the entire balance of $2,276 So here's what happens a) Alex did make 6 payments of $112 or $672 total over 6 months. So subtract this from the initial balance to get: 2,276 - 672 = 1604. Notice how the balance is not $0. So the balance was not paid for in full. If it was $0, then Alex can walk away without having to make any more payments. It's not $0, so we move onto b) b) Because the balance was NOT paid in full by the end of the 6 month deferment period, this means that interest is applied for every month in the 6 month deferment period. All of this is applied to the initial balance and payments are not factored in (yet). So, P*(1+r/n)^(n*t) = 2276*(1+0.2349/12)^(12*6/12) = 2,556.74 c) The balance is now 2,556.74 dollars. This would be the final answer if Alex did not make any payments at all during this 6 month period. However, alex did make monthly payments of $112 and he paid the company $672 so far. So that is subtracted from the balance to get 2,556.74 - 672 = 1,884.74 So that explains why the remaining balance after the 6 month deferment period is $1,884.74 The same basic steps are applied to the problem with Sakura as well.

    • 9 months ago
  67. murrcat
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    Yeah, that's what I did

    • 9 months ago
  68. murrcat
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    For the Alex one

    • 9 months ago
  69. jim_thompson5910
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    ok great, glad you figured it out

    • 9 months ago
  70. murrcat
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    Hey sorry to bother you but theres a question just like the Alex one Farrah installed a new pool for $14,730 using a 12-month deferred payment plan with an interest rate of 19.33%. What is the balance after the deferment period if payments of $527 are made each month? $14,370.00 $17,843.62 $8,046.00 $11,519.62 My brother tried to do this with me and he got $8046.00 whereas I got $11,519.62 I did exactly what you said for the Alex question like 14730(1+0.1933/12)^(12*12/12) = 17843.62 THEN I took 527*12months and got 6324 Subtracted 17843.62 - 6324 = 11519.62 I'm pretty confident with my answer but my brother is telling me I'm wrong?

    • 9 months ago
  71. jim_thompson5910
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    your brother would be right if the interest wasn't applied retroactively, but it is

    • 9 months ago
  72. jim_thompson5910
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    $11,519.62 is the correct answer

    • 9 months ago
  73. jim_thompson5910
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    it would be nice if it was as simple as saying initial balance - (# of months)*(payment per month) 14730-12*527 8,406 but it's not that simple and that trap is thrown in there to catch students off guard

    • 9 months ago
  74. murrcat
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    Ah okay, thanks :) again!

    • 9 months ago
  75. jim_thompson5910
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    yw

    • 9 months ago
  76. murrcat
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    Garrett is graduating from college in twelve months, but he will need a loan in the amount of $6,785 for his last two semesters. He may either receive an unsubsidized Stafford Loan with an interest rate of 6.8%, compounded monthly, or his parents may get a PLUS Loan with an interest rate of 7.8%, compounded monthly. The Stafford Loan has a grace period of six months from the time of graduation. Which loan will have a higher balance at the time of repayment and by how much? The PLUS Loan has a higher balance by $72.54. The PLUS Loan has a higher balance by $112.83. The Stafford Loan has a higher balance by $177.86. The Stafford Loan has a higher balance by $250.40 Is C the right answer?

    • 9 months ago
  77. jim_thompson5910
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    Stafford Loan A = P(1+r/n)^(n*t) A = 6785(1+0.068/12)^(12*1.5) A = 7511.43390604005 A = 7511.43 ------------------------------- PLUS Loan A = P(1+r/n)^(n*t) A = 6785(1+0.078/12)^(12*1) A = 7333.56596333002 A = 7333.57 ------------------------------- The Stafford Loan has the higher balance Difference: 7511.43 - 7333.57 = 177.86 So C is definitely the correct answer

    • 9 months ago
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