Assessment Brief
Loans and Credit
In this open
response, you are going to pretend to be buying a high priced item using credit
of different kinds. We are going to
compare the cost of each and come to a conclusion.
I. Find Your Item (5 pts)
Using the links below, or one of your
choosing, find an item you would like to buy in the $300 to $700 range. List the item in the table provided. Even though you would normally include tax,
shipping and handling, we will ignore these in this exercise.
Name of Item
Special details
Site where you found
it
Price
LINKS:
http://www.circuitcity.com/ccd/home.do
http://www.sony.com/
http://www.tiffany.com/
http://www.zales.com/
II. Option 1: Use Your Credit Card (15 pts)
You have a Maxi Card with a $700 limit for
this exercise. The card has a monthly
finance charge of 1.67%. Fill out the
following table. Your payment each month
is $50. You are finished when you have
paid it off.
Each month, except the first:
Balance = last month’s new balance – payment
Monthly Finance Charge = balance (0.0167)
New balance = balance + monthly finance
charge
Month
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Balance
Interest
New Balance
Payment
Month
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Total
Balance
Interest
$
New Balance
Payment
$
Option 2: Get a Bank Loan
(10 pts)
You visited a local bank. Because of your good credit, they agreed to
give you a personal loan, simple interest, at the current interest rate of
12.5% APR.
You will pay this back in 1 year.
Interest
= p
r t =__________________
Total Payment = Principal + Interest
= ______________
Payment per month = Total Payment / 12 =
______________
III. Option 3: Installment Plan (10 pts)
The store you are buying the item down offers
you an installment plan.
The terms of the contract for the plan are:
· $50 down
· 12 payments
· Finance charge of $100
Interest = Finance Charge = ________________
Total Payment = Cost of
item + Finance charge = _____________
Monthly Payment = (Total Payment –
Down payment / 12 = __________
IV. Time to Choose! (10 pts)
Compare the three options.
a. Which is the most convenient?
b. Which has the shortest payment time?
c. Which has the lowest total payment and
interest?
d. Which has the lowest monthly payment?
e. Make a choice. Assuming that you could not pay for your item
any other way, which would you choose and why? Your reasons why may incorporate a, b, c, and
d, but may also include other reason
