3.1 Introduction to Consumer Credit

1. Monique purchases a $5,100 dining room set. She can’t afford to pay cash, so she uses the installment plan, which requires an 18% down payment. How much is the down payment?

• $918

• $510

• $1,200

• $2,550

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2. Snow-House sells a $1,980 snow thrower on the installment plan. The installment agreement includes a 20% down payment and 12 monthly payments of $161 each. What is the finance charge?

• $512

• $116

• $376

• $348

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3. Lisa purchases a professional racing bicycle that sells for $3,000, including tax. It requires a $200 down payment. The remainder, plus a finance charge, is paid back monthly over the next 2 ½ years. The monthly payment is $111.75. What is the finance charge?

• $3,352.50

• $111.75

• $2,112.75

• $552.50

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4. Depot Headquarters has a new promotional payment plan. All purchases can be paid off on the installment plan with no interest, as long as the total is paid in full within twelve months. There is a $25 minimum monthly payment required. If the Koslow family buys a hot tub for$4,355, and they make only the minimum payment for 11 months, how much will they have to pay in the 12^th month?

• $4,080

• $4,355

• $275

• $0

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5a. Joe wants to purchase an electric keyboard. The price of the keyboard at Macelli’s, with tax, is $2,340. He can save $185 per month. How long will it take him to save for the keyboard?

• 12 months

• 10 months

• 11 months

• 13 months

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5b. Joe wants to purchase an electric keyboard. The price of the keyboard at Macelli’s, with tax, is $2,340. Macelli’s offers an installment plan that requires a 20% down payment and the remaining balance plus a finance charge paid back in 12-monthly payments of $176.50. If Joe is considering the installment plan so that he can have the keyboard immediately, how much will the finance charge be?

• $468

• $2,118

• $246

• $2,586

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6. Carey bought a $2,100 computer system on the installment plan. He made a $400 down payment, and he has to make monthly payments of $79.50 for the next two years. How much interest will he pay?

• $1,908

• $208

• $140

• $2,308

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7. The Bauer’s purchased $3,598 worth of furniture from La-Z-Boy through a deferred payment plan. There was no down payment and no payments required for six months. To not pay any interest, the Bauer’s must pay off the entire $3,598 before the six months is up. If the Bauer’s do not pay off the full balance by the end of the six months, there is a finance charge with an APR of 25.2% applied each month going back to the first month. Since the Bauer’s did not get the furniture paid off by the end of the six months, what is their total finance charge?

• $477.83

• $4,075.83

• $398.12

• $1,025.79

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8. Phil applied for a $5,500 loan to be paid back in 5 years. Because his credit score was too low, he qualified for a simple interest rate of 8.4%. So Phil asked his grandmother who has a great credit score to apply for the same loan for him and she qualified for 4 percentage points lower than Phil did. How much will Phil save in interest if he has his grandmother take out the loan for him?

• $1,100

• $1,210

• $2,310

• $580

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9. Mrs. Grudman bought a dishwasher at a special sale. The dishwasher regularly sold for $912. No down payment was required. Mrs. Grudman has to pay $160 for the next six months. What is the average amount she pays in interest each month?

• $48/month

• $6/month

• $8/month

• $960/month

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