**BUSN 380 DEVRY WEEK 3 PROBLEM SET 3**

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**BUSN 380 DeVry Week 3 Problem Set 3**

**BUSN380**

**BUSN 380 DeVry Week 3 Problem Set 3**

Problem Set 3

- Louise McIntyre’s monthly gross income is $2,000. Her employer withholds $400 in federal, state, and local income taxes and $160 in Social Security taxes per month. Louise contributes $80 per month for her IRA. Her monthly credit payments for VISA, MasterCard, and Discover card are $35, $30, and $20, respectively. Her monthly payment on an automobile loan is $285. What is Louise’s debt payments-to-income ratio? Is Louise living within her means?
- Calculating Debt Payments – to – Income Ratio. Suppose that your monthly net income is $2,400. Your monthly debt payments include your student loan payment, a gas credit card and they total $360. What is your debt payments – to – income ratio?
- Dave borrowed $500 for one year and paid $50 in interest. The bank charged him a $5 service charge.

- What is the finance charge on this loan?
- Dave borrowed $500 on January 1, 2006, and paid it all back at once on December 31, 2006. What was the APR?
- If Dave paid the $500 in 12 equal monthly payments, what is the APR?

- Calculating Simple Interest on a Loan. Damon convinced his aunt to lend him $2,000 to purchase a plasma digital TV. She has agreed to charge only 6 % simple interest, and he has agreed to repay the loan at the end of one year. How much interest will he pay for the year?
- After visiting several automobile dealerships, Richard Welch selects the car he wants. He likes its $10,000 price, but financing through the dealer is no bargain. He has $2,000 cash for a down payment, so he needs an $8,000 loan. In shopping at several banks for an installment loan, he learns that interest on most automobile loans is quoted at add-on rates. That is, during the life of the loan, interest is paid on the full amount borrowed even though a portion of the principal has been paid back. Richard borrows $8,000 for a period of four years at an add-on interest rate of 11 percent.

__Questions__

- What is the total interest on Richard’s loan?
- What is the total cost of the car?
- What is the monthly payment?
- What is the annual percentage rate (APR)?