Consumer Credit 1. Identify the costs, benefits, and sources of various types of credit. 2. Calculate sales tax and computer total price with sales tax. 3. Compute total purchase p... Consumer Credit 1. Identify the costs, benefits, and sources of various types of credit. 2. Calculate sales tax and computer total price with sales tax. 3. Compute total purchase price with interest/finance charges added 4. Compute the costs involved in owning and buying an item such as an automobile, appliances, home, or furniture. 5. Compute finance charges for single payment loans. 6. Calculate installment loan costs such as amount financed, installment price, finance charge, and installment payment. 7. Find the estimated annual percentage rate (APR) using a table. 8. Compare costs of leasing and buying. 9. Find the finance charge and new balance using the average daily balance method. 10. Read amortization tables to determine payment, interest and balance. 11. Compute Annual and monthly Percentage Rate for credit cards or loan. 12. Find the monthly mortgage payment. 13. Find the total interest on a mortgage and the PITI. 14. Prepare a partial amortization schedule of a mortgage. 15. Compare the total interest paid on a 15-year and 30-year fixed rate mortgage. 16. Define and compare the interest only, fixed rate, and adjustable-rate loans.
Understand the Problem
The question is asking to identify and compute various concepts related to consumer credit, including costs, benefits, sales tax, interest charges, and differences between leasing and buying. Each point outlines a different calculation or comparison that needs to be performed to understand the financial implications of credit use.
Answer
Consumer credit involves calculating costs such as interest and sales tax, and comparing leasing and buying options to understand financial implications.
Answer for screen readers
The computations for consumer credit involve determining interest costs, sales tax, and comparing financial implications between leasing and buying. These calculations reveal the financial impact of using consumer credit.
Steps to Solve
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Identify the costs of credit First, list all costs associated with consumer credit. This includes interest rates and fees charged by lenders. For example, if you have a loan of $1000 with an interest rate of 5% for one year, the interest cost can be calculated as: $$ Interest = Principal \times Rate = 1000 \times 0.05 = 50 $$
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Calculate sales tax on purchases Determine the sales tax applied to your purchases. If you buy an item costing $200 and the sales tax rate is 8%, you can calculate the sales tax as follows: $$ Sales\ Tax = Purchase\ Price \times Tax\ Rate = 200 \times 0.08 = 16 $$
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Determine interest charges over time If you want to explore how interest accumulates over several years, you can use the formula for compound interest. For example, for $1000 at a 5% interest rate compounded annually over 3 years: $$ A = P(1 + r)^t = 1000(1 + 0.05)^3 $$
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Compare leasing vs. buying List the benefits and drawbacks of leasing versus buying. For instance, leasing may have lower monthly payments but comes with mileage limits, while buying may involve higher initial costs but provides ownership.
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Calculate the total cost of buying versus leasing Consider a scenario where buying a car costs $20,000, while the total lease payments over three years is $12,000. You can add in any additional costs (like maintenance) to compare the two options.
The computations for consumer credit involve determining interest costs, sales tax, and comparing financial implications between leasing and buying. These calculations reveal the financial impact of using consumer credit.
More Information
Understanding the various facets of consumer credit can help individuals make informed financial decisions, especially when considering big purchases like cars or homes. Interest rates can significantly affect the total cost of credit.
Tips
- Not considering all costs associated with credit, such as hidden fees or varying interest rates over time.
- Failing to apply sales tax correctly based on the local regulations.
- Confusing the benefits of leasing (lower payments) with the overall costs, leading to poor financial decisions.
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