Question

While commuting to work, Sherry was side-swiped by a semi-truck on I-75. Luckily, she was not injured, however, the car was totaled. Bo and Sherry have no choice; but, to purchase a new vehicle. As home owner’s, they decided that a truck would be the more practical transportation option for them. So, after “truck shopping” over a weekend, they purchased a 2017 Ford Ranger for $26,200. Upon arriving at the dealership to sign the loan forms and pick up the truck, they became aware that they were required to pay tax and license fees of $1,700. Bo and Sherry used the insurance settlement from the accident totaling $3,200 as a down-payment on the truck loan. As a result, they borrowed $23,000 at 9% interest for 5 years with monthly payments of $477.44.

Question 6: How much will Bo and Sherry pay for the truck, including tax and license fees and finance charges.

Answer:

Bo and Sherry called their insurance company to arrange for insurance coverage for the new truck. The insurance company gave them the option to pay the $360 six-month premium now, or with 6 monthly payments of $67.50, starting today.

Question 7: Bo and Sherry decided to take the option to pay with the installment plan, what APR did they pay?

Answer:

One of Bo and Sherry’s long-term goals was to start their own business. Given Bo’s level of expertise in repairing equipment, they decided to start a repair business and originally estimated that it will take $25,000 to get the business started. They had $5,000 set aside, and decided to deposit, plus and an additional $400 at the end of each month. They deposited the money into an investment account that would earn 6% compounded monthly.

Question 8: How many months did it take Bo and Sherry to save enough money to start their business?

Answer:

Answer 1

Q#6:

Money paid for the truck, including tax and license fees and finance charges

= Monthly payments on the loan*Number of payments + down payment + Insurance and registration charges

= 477.44*5*12 + 3200 + 1700 = 26646.40 + 3200 + 1700 = $33,546.40

Q#7:

APR of insurance payments monthly= 59.6136%

Calculation as below:

Q#8:

Number of months Bo and Sherry took to save enough money to start their business= 42.369744

Calculation as below: