Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN: 9780357033609
Author: Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher: Cengage Learning
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Chapter 7, Problem 1FPE
Summary Introduction
To explain: Options for education loan
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Students have asked these similar questions
A certified financial planner notes that with an unsubsidized student loan,
the borrower has the choice of whether to make interest payments on the loan while
still in college. She advises that making the interest payments rather than postponing
them until after graduation is "always to your financial benefit ... because otherwise
the interest payments will capitalize"
(a)
(b)
Why does she believe that making the payments would be to your fi-
nancial benefit? Are there good reasons some students decide to postpone making
the interest payments until after they graduate? Briefly explain.
What does the financial planner mean when noting that the interest
payments will "capitalize"?
REFLECTING
Should Jill
consider a payday
loan to purchase
the refrigerator?
Explain.
Hint
APR means annual
percent rate.
2. Jill is buying a new refrigerator. She cannot afford to pay
cash. Should she use a credit card or get a personal loan?
Justify your answer.
3. Liam, a taxi driver in Revelstoke,
wants to buy a new taxi. He was
approved for the loans in this chart.
a) What should Liam think about
when he chooses a loan?
should Choose the
Lost
Fixed
APR payments for
4 Apprenticeship and Workplace 11
secured
personal 5.5%
loan
auto loan
7.5%
b) Which loan should Liam choose? Explain why.
4 yr
6 yr
4. Hannah says that using payday loans and cash advances on
credit cards are bad choices for borrowing money. Do you
agree or disagree? Explain.
NEL
Scenario 2:Saving for collegeYou are a freshman in high school andhave your eye on a college degree. Butcollege is expensive, especially sincethe costs include tuition, food, livingexpenses, travel and books.What financial information do youneed?What financial decision-makingstrategies can you use?(Cost comparison, cost-benefitanalysis, calculating future expensesor budgeting?)
Chapter 7 Solutions
Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
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- REFLECTING Should Jill consider a payday loan to purchase the refrigerator? Explain. Hint APR means annual percent rate. F welding. He needs money 2. Jill is buying a new refrigerator. She cannot afford to pay cash. Should she use a credit card or get a personal loan? Justify your answer. 3. Liam, a taxi driver in Revelstoke, wants to buy a new taxi. He was approved for the loans in this chart. a) What should Liam think about when he chooses a loan? Choose a louh APR Loan secured personal loan auto loan 7.5% 5.5% b) Which loan should Liam choose? Explain why. Fixed payments for 4 yr 6 yr 4. Hannah says that using payday loans and cash advances on credit cards are bad choices for borrowing money. Do you agree or disagree? Explain.arrow_forward(Solving for r with annuities) Nicki Johnson, a sophomore mechanical engineering student, receives a call from an insurance agent, who believes that Nicki is an older woman ready to retire from teaching. He talks to her about several annuities that she could buy that would guarantee her an annual fixed income. The annuities are as follows If Nicki could earn 11 percent on her money by placing it in a savings account, should she place it instead in any of the annuities? Which ones, if any? Why? a. What rate of return could Nicki earn on her money if she place it in annuity A with $6500 payment per year and 16 years duration?arrow_forwardJoe bob wants to buy a car and will need to take out a loan in order to make the purchase. His current monthly income is 3,500 per month. His mortgage payment is 900 per month, and his student loan payment is 350 per month according to the affordability formulas given can he afford to take out another loan? when should he follow the affordability formulas? In what case should he not? how could taking out the car loan impact his other priorities? what is the affordability formula I need to use as wellarrow_forward
- On subsidized Stafford loans, a common source of financial aid for college students, interest does not begin to accrue until repayment begins. Who receives a bigger subsidy, a freshman or a senior? Explain. Found in MBA 640 Finance, Economics and Decision Making. Chapter 3 concept question #5arrow_forwardRead the passage and answer the following question(s). dis ins Homeowner and Renters Insurance: Protect Your Belongings You may be able to save hundreds of dollars a year on homeowners insurance by shopping around. You can also save money with these tips: Consider a higher deductible. Increasing your deductible by just a few hundred dollars can make a big difference in your premium. Ask your insurance agent about discourks. You may be able to get a lower premium if your home has safety features such as dead-bolt locks, smoke detectors, an alarm system, storm shutters or fire retardant roofing material. Persons over 55 years of age or long-term customers may also be offered discounts. OD. Insure your house NOT the land under it. After a disaster, the land is still there. If you don't subtract the value of the land when deciding how much homeowners insurance to buy, you will pay more than you should. Don't wait till vou have lorarrow_forwardThis is a Debt Coverage Ratio or DCR question for part a and a CAP rate question for part b]. Wendy is going to purchase a commercial building and is working with a commercial lender at her local bank. The bank has some loan parameters that Wendy must follow. Understanding the rules will allow her to calculate her cash, income, and payment projections. The bank requires a 1.4 debt coverage ratio for her project. Wendy needs to calculate her net operating income or NOI first. The debt coverage ratio is based on this number. Then she will apply for a 20 year loan at 5% with annual payments. Information on the property includes: Gross rents- $780,000 Vacancy 5% Salaries $85,000 Other Fixed Expenses $125,000 Variable Expenses 20% of gross rents. NOI=_________________ Use the NOI and Debt Coverage requirement to calculate the answer. What is the largest annual payment the bank will allow? If Wendy had to buy the property at a 6% CAP (capitalization) rate, what is the asking price?arrow_forward
- Discuss the following scenarios, then to decide which option is best and why. Susan and Jose rent an apartment and have been saving for a house. They now have $10,000 in the bank. Susan owes $4,000 on a low-interest credit card; Jose owes $4,500 on his car. Susan wants to pay the credit card and car off to eliminate the debt. Jose wants to keep the cash in the bank and continue saving for the house. What are the pros and cons of each one’s argument? Please be detailed and concise. Feel free to use a chart or table to represent your argument. Jack is a 40-year-old construction worker. He makes $33,500 per year. He only saves 5 percent of his salary per year since it is all he feels he can afford. His friend Joe suggests that he invest his money conservatively so that it won’t lose as much value if the market takes a nosedive. His other friend Jim thinks that investing aggressively with high risk is the way to go since Jack has several years to work to make up for any losses. What do…arrow_forwardII. Case Application. Answer the following situations by applying what you have learned from the previous discussions. A customer says, "Insurance is a waste of money. If and when I suffer a financial loss because of an accident or some other event, I can pay for it from my savings account." As an insurance agent your primary goal is to change this kind of mindset, how would you persuade this person to purchase insurance? Design a strategy. At 30, Alyssa Valdez invested P50,000 in a time deposit which earns 3% per annum. With the same interest rate, how much would her earnings be at age 35 if she reinvests the interest with the principal. Show your solutionarrow_forwardFirst-time homeowners often use FHA loans to finance their home. Go to fha-home-loans.com and find out the current requirements to qualify for an FHA loan. They may differ slightly from that described in the book because the underwriting requirements frequently change. Summarize the types of loans that are currently available. What is the highest loan-to-value ratio that you could obtain?arrow_forward
- A couple in their 70s with no liens on their home would like some extra income, but don't want to make monthly loan payments. What kind of loan might a lender offer them? A- A reverse equity loan, since they are over 62 and have sufficient equity in their home B A reverse equity loan, since they are over the age of 35 C- A reverse equity loan, but the couple will need to make monthly payments D - None; a lender will probably refuse to lend to anyone over the age of 62 -arrow_forwardKayla Gordan plans to borrow $300,000 from ANZ bank to set up a Nail Salon.She currently has $10,000 in savings and she will use her house as security for the loan.Which of the following best represents a risk associated with this financing method? A.Kayla's proportion of business ownership will be diluted B.Interest payments are tax deductible C.Bank will repossess her house if she defaults on the loan D.Kayla is required to pay dividends to the bankarrow_forwardPlanning a new car purchase . Olivia Green has just graduated from college and needs to buy a car to commute to work. She estimates that she can afford to pay about $450 per month for a loan or lease and has about $2,000 in savings to use for a down payment . Develop a plan to guide her through her first car -buying experience , including researching car type , deciding whether to buy a new or used car , negotiating the price and terms , and financing the transactionarrow_forward
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