Question

Finance Charges.  Bill wants to purchase a new car for ​$42 comma 000. Bill has no​ savings, so he needs to finance the entire purchase amount. With no down​ payment, the interest rate on the loan is 17​% and the maturity of the loan is six years. His monthly payments will be ​$934.34. ​Bill's monthly net cash flows are ​$667. Bill also has a credit card with a ​$12 comma 055 limit and an interest rate of 22​%. If Bill uses all of his net cash flows to make the monthly payments on the​ car, how much will he add each month to his credit card balance if he uses it to finance the remainder of the​ car? What will the finance charges be on his credit card for the first two months that finance charges​ apply? ​(Assume that Bill makes no payments on his credit card for the first two​ months.)

The amount Bill will add each month to his credit card balance if he uses it to finance the remainder of the car is ​$

Answer 1

Answer:

If Bill uses all of his net cash flows to make the monthly payments on the​ car, how much will he add each month to his credit card balance if he uses it to finance the remainder of the​ car?

The amount Bill will add each month to his credit card balance if he uses it to finance the remainder of the car is ​$ 267.34

What will the finance charges be on his credit card for the first two months that finance charges​ apply? ​(Assume that Bill makes no payments on his credit card for the first two​ months.)

In the first 2 months, bill will add (267.34*2) $ 534.68 to his credit card balance. Finance charges at 22% for 2 months will be: $ 534.68 * 0.22 * 2/12 = $19.60

Working:

Heading	Explanation	Amount $
Cost of new car	PV	42000
Interest rate	Rate	1.417%
Term (years)		6
Term (months)	NPER	72
Monthly payments	PMT(rate,nper,pv,fv,type)	934.34
Monthly net cash flows		667
Paid through credit card to finance car per month	934.34-667	267.34
Payment for car through credit card for 2 months	2*267.34	534.68
Finance charges/Interest	[534.68*0.22*2/12	19.60