Credit types, costs and trade-offs; Personal-loan interest, administration and other fees; Borrowing versus saving in a specified model
Example 1
A flat-rate loan of $6000 charges 4% per year for 4 years and a $150 establishment fee. Find total borrowing cost, excluding principal.
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Answer: 1110
Flat interest =Prt=960. Add the establishment fee 150.
Example 2
A $6000 loan charges 1% interest per month. After interest is added, a $600 payment is made at each month-end. Find the balance after two payments. Round to 2 decimal places.
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Answer: 4914.60
Use B(next)=1.01B− payment twice. Payments are made after each month’s interest.
Rounded result: 4914.60.
Example 3
A credit purchase requires a $600 deposit and 36 monthly payments of $100. The cash price is $4000. Find the extra cost of credit.
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Answer: 200
Total credit payments = deposit + number × monthly payment. Subtract the stated cash price.
Put it into practice.
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