PROBLEM SET

CHAPTER 01
1. The Rule of 72 provides a guideline for determining how long it takes your money to double. This rule
can also be used to determine your earning rate. If your money is expected to double in 12 years, what is
your rate of return?
12 yrs= 72/(% average of return)=72/x => x=72/12 = 6 => 6% to double in 12 yrs
2. If you desire to have $10,000 in savings eight years from now, what amount would you need to deposit
in an account that earns 5 percent?
FV= 10,000
PMT= 0 PV=FV/((1+R)^N)
N= 8
R= 5%
PV=?

1. Using the Rule of 72, approximate the following amounts: (LO1.1)

a. If the value of land in an area is increasing 6 percent a year, how long will it take for property values
to double?
b. If you earn 10 percent on your investments, how long will it take for your money to double?
c. At an annual interest rate of 5 percent, how long will it take for your savings to double?
SOL: a. Time to x2= 72/6 = 12 yrs
b. Time to x2= 72/10= 7.2 yrs
c. Time to x2= 72/5 = 14.4 yrs

2. In 2011, selected automobiles had an average cost of $16,000. The average cost of those same
automobiles is now $20,000. What was the rate of increase for these auto- mobiles between the two time
periods? (LO1.1)
SOL: The rate of increase for these auto- mobiles between the two time periods was
= (20,000-16,000)/16,000= 25%
3. A family spends $46,000 a year for living expenses. If prices increase 3 percent a year for the next three
years, what amount will the family need for their living expenses after three years? (LO1.1)
SOL: PV=46,000
R= 3%/yr FV = PV*(1+3%)^3= 50,265.44
N=3 yrs
FV=?
4. Ben Collins plans to buy a house for $220,000. If the real estate in his area is expected to increase in
value 2 percent each year, what will its approximate value be seven years from now? (LO1.2)
SOL: PV= 220,000
R= 2%/yr FV=PV*(1+R)^N=252,710.85
N=7
FV= ?
5. What would be the yearly earnings for a person with $6,000 in savings at an annual interest rate of 2.5
percent? (LO1.3)
SOL: PV= 6,000
R=2.5% PMT= PV*R = 6,000*2.5%= 150
PMT=?
6. Using time value of money tables ( Exhibit 1–3 or chapter appendix tables), calculate the following:
(LO1.3)
a. The future value of $550 six years from now at 7 percent.
b. The future value of $700 saved each year for 10 years at 8 percent.
 c. The amount a person would have to deposit today (present value) at a 5 percent interest rate to have
$1,000 five years from now.
d. The amount a person would have to deposit today to be able to take out $500 a year for 10 years
from an account earning 8 percent.
SOL: a. PV= 550
R=7%
N=6 FV=PV*(1+R)^N=825.4
FV=?
b. PMT= 700
R= 8%
N= 10
FV=? FV= 700*((1+8%)^10-1)/8%= 10,140.59
c. R=5%
N= 5 PV= FV/(1+5%)^5= 783.53
FV= 1,000
PV= ?
d. PMT = 500
N= 10 PV= PMT* ((1-(1/(1+R)^N)/R))=3,355.04
R= 8%
PV=?

7. If you desire to have $10,000 for a down payment for a house in five years, what amount would you
need to deposit today? Assume that your money will earn 4 percent. (LO1.3)
SOL: FV= 10,000
N=5 PV= FV/(1+R)^5= 8,219.27
R=4%
PV=?
8. Pete Morton is planning to go to graduate school in a program of study that will take three years. Pete
wants to have $8,000 available each year for various school and living expenses. If he earns 4 percent on
his money, how much must he deposit at the start of his studies to be able to withdraw $8,000 a year for
three years? (LO1.3)
SOL: N=3
PMT= 8,000 PV= 22,200.73
R= 4%
PV= ?

9. Carla Lopez deposits $3,000 a year into her retirement account. If these funds have average earnings of
8 percent over the 40 years until her retirement, what will be the value of her retirement account?
(LO1.3)
SOL: PMT= 3,000
R= 8% FV= 777.17
N=40
FV= ?
10. If a person spends $10 a week on coffee (assume $500 a year), what would be the future value of that
amount over 10 years if the funds were deposited in an account earning 3 percent? (LO1.3)
SOL: PMT= 500
N=10 FV= 5,731.94
R= 3%
FV=?
11. A financial company that advertises on television will pay you $60,000 now for annual payments of
$10,000 that you are expected to receive for a legal settlement over the next 10 years. If you estimate the
 time value of money at 10 percent, would you accept this offer? (LO1.3) ( có 2 lựa chọn 1 là nhận 60k 2
là nhận 10k hàng năm
SOL: PMT= 10,000
R= 10% PV= 61,445.67
N=10
PV=?
61,445.67 > 60,000 => keep the legal settlement not accept the offer
12. Tran Lee plans to set aside $2,200 a year for the next seven years, earning 3 percent. What would be the
future value of this savings amount? (LO1.3)
SOL: PMT = 2,200
N= 7 FV= 16,857.42
R= 3%
FV=?
13. If you borrow $8,000 with a 5 percent interest rate to be repaid in five equal payments at the end of the
next five years, what would be the amount of each payment? ( Note: Use the present value of an annuity
table in the chapter appendix.) (LO1.3)
SOL: PV= 8,000
N= 5 PMT= 1,848
R= 5%
PMT =?
CHAPTER 02
1. The Hamilton household has $145,000 in assets and $63,000 in liabilities. What is the family’s net
worth?
SOL: Net worth= A- L = 145,000- 63,000= 82,000
2. Harold Daley budgeted $210 for food for the month of July. He spent $227 on food during July.
Does he have a budget surplus or deficit, and what amount?
SOL: After spending, budget remain = 210- 227 = -17 => Budget deficit

1. Based on the following data, determine the amount of total assets, total liabilities, and net worth.
(LO2.2)
Liquid assets, $3,870 Investment assets, $8,340
Current liabilities, $2,670 Household assets, $87,890
Long-term liabilities, $76,230
SOL:
a. Total assets $ _____ = 3,870+ 8,340+ 87,890= 100,100
b. Total liabilities $ _____ = 2,670+ 76,230= 78,900
c. Net worth $ _ ____ = 100,100- 78,900= 21,200
2. Using the following balance sheet items and amounts, calculate the total liquid assets and total current
liabilities. (LO2.2)
Money market account, $2,600 Medical bills, $262
Mortgage, $158,000 Checking account, $780
Retirement account, $87,400 Credit card balance, $489

SOL:
a. Total liquid assets $ _____= Money market account + checking account = 2,600+ 780= 3,380
b. Total current liabilities $ _____ = Medical bills + Credit card balance= 262 + 489 = 751
3. Use the following items to determine the total assets, total liabilities, net worth, total cash inflows, and total
cash outflows. (LO2.2)

Rent for the month, $650 Monthly take-home salary, $2,185

Spending for food, $345 Cash in checking account, $450
 Savings account balance, $1,890
Current value of automobile, $8,800
Credit card balance, $235
Auto insurance, $230
Video equipment, $2,350
Lunches/parking at work, $180
Personal computer, $1,200
Clothing purchase, $110
Balance of educational loan, $2,160
Telephone bill paid for month, $65
Loan payment, $80
Household possessions, $3,400
Payment for electricity, $90
Donations, $160
Value of stock investment, $860
Restaurant spending, $130

a. Total assets $ _____ = Cash in checking account + Saving account balance + Current value of
automobile+ Household possessions+ Video equipment+ Personal computer+ Value of stock investment =
18,950
b. Total liabilities $ __= Balance of educational loan+ Credit card balance= 2,395
c. Net worth $ _____ = 18,950- 2,395= 16,555
d. Total cash inflows $ _____ = Monthly take-home salary = 2,185
e. Total cash outflows $ _____= Rent for the month+ Spending for food+ Telephone bill paid for month+
Auto insurance+ Loan payment+ Payment for electricity+ Lunches/parking at work+ Donations+
Clothing purchase+ Restaurant spending= 2,040

4. For each of the following situations, compute the missing amount. (LO2.2)
a. Assets $65,000; liabilities $18,000; net worth $ _____= 65,000- 18,000= 47,000
b. Assets $86,500; liabilities $ _____ =86,500- 18,700= 67,800 ; net worth $18,700
c. Assets $34,280; liabilities $12,965; net worth $ _____ =34,280-12,965= 21,315
d. Assets $ _____ = 52,654+ 38,345= 90,999 ; liabilities $38,345; net worth $52,654

5. Based on the following financial data, calculate the ratios requested. (LO2.2)
Liabilities, $7,800 Net worth, $58,000
Liquid assets, $4,600 Current liabilities, $1,300
Monthly credit payments, $640 Take-home pay, $2,575
Monthly savings, $130 Gross income, $2,850

a. Debt ratio _____ = Total Debt/ Net Worth ( chỉ với tccn) = 7,800/ 58,000 = 13.45%
( Total Debt = 7,800; Net worth =58,000)
b. Current ratio _____ = Ca/Cl = 4,600/ 1,300 = 3.538
( Ca= 4,600; Cl= 1,300)
c. Debt-payments ratio _____ = Monthly credit pmt/ Take- home pay = 640/ 2,575 = 24.85%
d. Savings ratio _____ = Monthly saving / Gross income = 130/ 2,850 = 4.56%

6. The Fram family has liabilities of $128,000 and a net worth of $340,000. What is their debt ratio? How
would you assess this? (LO2.2)
SOL: Debt ratio = Total Debt / Net worth = 128,000/ 340,000 = 37.65%

7. Carl Lester has liquid assets of $2,680 and current liabilities of $2,436. What is his current ratio? What
comments do you have about this financial position? (LO2.2)
SOL: Current ratio = Ca/ Cl = 2,680/ 2,436 = 1.1
=> This level of current latio is low and it is not a good sign ( as a high current ratio is desirable to have
more cash available to pay bills )
8. For the following situations, calculate the cash surplus or deficit: (LO2.2)
Cash Inflows Cash Outflows Difference (surplus or deficit)
$3,460 $3,306 $ _____ _____= 3,460- 3,306= 154 => surplus
 4,693 4,803 $_____ _____ = 4,693- 4,803= -110 => deficit
4,287 4,218 $_____ _____= 4,287- 4,218 = 69 => surplus

9. The Brandon household has a monthly income of $5,630 on which to base their budget. They plan to save 10
percent and spend 32 percent on fixed expenses and 56 percent on variable expenses. (LO2.3)
a. What amount do they plan to set aside for each major budget section?
Savings $ _____ = 5,630 * 10%= 563
Fixed expenses $ _____ = 5,630* 32%= 1801.6
Variable expenses $ _____ = 56%* 5630= 3152.8
b. After setting aside these amounts, what amount would remain for additional savings or for paying off debts?
Remain for additional savings or for paying off debts = 112.6

10. Fran Powers created the following budget and reported the actual spending listed.
Calculate the variance for each of these categories, and indicate whether it was a deficit or a surplus. (LO2.3)
Item Food Budgeted Actual Variance Deficit/Surplus
Transportation $360 $298 _____=360- 298= 62 _____surplus
Housing 320 334 _____= 320- 334= -14 _____deficit
Clothing 950 982 _____=950- 982= -32 _____deficit
Personal 110 134 _____= 110- 134= -24 _____deficit
Clothing 275 231 _____= 275- 231= 44 _____surplus
Personal

11. Ed Weston recently lost his job. Before unemployment occurred, the Weston house- hold (Ed; wife, Alice;
two children, ages 12 and 9) had a monthly take-home income of $3,165. Each month, the money went for the
following items: $880 for rent, $180 for utilities, $560 for food, $480 for automobile expenses, $300 for
clothing, $280 for insurance, $250 for savings, and $235 for personal and other items. After the loss of Ed’s job,
the household’s monthly income is $1,550 from his wife’s wages and his unemployment benefits. The Westons
also have savings accounts, investments, and retirement funds of $28,000. (LO2.3)
a. What budget items might the Westons consider reducing to cope with their finan- cial difficulties?
b. How should the Westons use their savings and retirement funds during this finan- cial crisis? What
additional sources of funds might be available to them during this period of unemployment?
SOL: a. Common cutbacks occur in the areas of food, clothing, savings, and personal spending.
b. Savings funds should be used to pay fixed expenses and necessities. Retirement funds should
only be used if a lengthy unemployment time is encountered or if large, expected expenses occur.
Other sources of funds may include loans, sale of investments, or sale of no longer needed
household items.
12. Use future value and present value calculations (see tables in the appendix for Chap- ter 1) to determine
the following: (LO2.4)
a. The future value of a $600 savings deposit after eight years at an annual interest rate of 6 percent.
b. The future value of saving $1,800 a year for five years at an annual interest rate of 5 percent.
c. The present value of a $2,000 savings account will earn 3 percent interest for four years.
SOL: a. PV= 600
N= 8 FV= 956.31
R= 6%
FV= ?
b. PMT= 1,800
N= 5 FV= 9946.14
R= 5%
FV= ?
c. FV= 2,000
N= 4 PV= 1776.97
 R= 3%
PV= ?

13. Brenda plans to reduce her spending by $50 a month. What would be the future value of this reduced
spending over the next 10 years? (Assume an annual deposit to her savings account, and an annual interest
rate of 3 percent.) (LO2.4)
SOL: Annual reduced spending = 50*12 = 600
( annual savings deposit)
N= 10
R= 3% FV= 6,878.33
PMT= 600
FV= ?
14. Kara George received a $5,000 gift for graduation from her uncle. If she deposits this in an account
paying 3 percent, what will be the value of this gift in 12 years? (LO2.4)
SOL: Value of this gift in 12yrs = 5,000 * (1+3%)^12
= 7,128.8

CHAPTER 05
1. Suppose that your monthly net income is $1,500. Your monthly debt payments include your student
loan payment and a gas credit card, and they total $200. What is your debt payments-to-income
ratio?
SOL: Debt pmt to income ratio = Monthly debt pmt/ Monthly net income
=200/1500 = 13%
2. Suppose you borrow $1,000 at 6 percent and will repay it in one payment at the end of one year. Use
the simple interest formula to determine the amount of interest you will pay.
SOL: The amount of interest you will pay = 1,000 * 6%
= 60
1. A few years ago, Simon Powell purchased a home for $110,000. Today, the home is worth $150,000.
His remaining mortgage balance is $50,000. Assuming that Simon can borrow up to 80 percent of the
market value, what is the maximum amount he can borrow? (LO5.2)
SOL: The Amount available for borrowing = (Current value of home × Borrowing
percentage) - Mortgage balance
= ($150,000 × 0.80) - $50,000
= $120,000 - $50,000
= $70,000
2. 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 each month for
her IRA. Her monthly credit payments for Visa and MasterCard are $35 and $30, 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? (LO5.3)
SOL: Net income = Gross income - Taxes - IRA contribution
= $2,000 - 400 - 160 - 80
= $1,360

Debt payments = Credit card payments + Auto loan payment

= $35 + 30 + 285
= $350

Debt payments-to-income ratio = Debt payments / Net income

= $350 / $1,360
= 0.257, or 25.7%
 Louise is not living within her means because her debt payments-to-income ratio exceeds 20
percent of her net income ( page 151 chap 5 textbook general rules of credit capacity)
3. Robert Sampson owns a $140,000 townhouse and still has an unpaid mortgage of $110,000. In addition
to his mortgage, he has the following liabilities:
Visa $565
MasterCard 480
Discover card 395
Education loan 920
Personal bank loan 800
Auto loan 4,250
Total $7,410
Robert’s net worth (not including his home) is about $21,000. This equity is in mutual funds, an
automobile, a coin collection, furniture, and other personal prop- erty. What is Robert’s debt-to-equity
ratio? Has he reached the upper limit of debt obligations? Explain. (LO5.3)
SOL:Debt to equity ratio = Debt ratio = Total Debt / Net worth = Total Debt / Equity = 7,410/
21,000= 35.29%
=> He has not reached the upper limit of debt obligation ( which is 1 ) ( tìm ra ở debt to
equity value page 151 textbook )
4. Madeline Rollins is trying to decide whether she can afford a loan she needs in order to go to
chiropractic school. Right now Madeline is living at home and works in a shoe store, earning a gross
income of $820 per month. Her employer deducts a total of $145 for taxes from her monthly pay.
Madeline also pays $95 on several credit card debts each month. The loan she needs for chiropractic
school will cost an additional $120 per month. Help Madeline make her decision by calculating her debt
payments-to-income ratio with and without the college loan. (Remember the 20 percent rule.) (LO5.3)
SOL: Debt payments-to-income ratio = Debt payments / Net income
Debt pmt to income ratio without college loan = 95/ (820-145)= 14.07%
Debt pmt to inc ratio with college loan = (95+120)/ (820-145)= 31.85%
Madeline’s debt payments-to-income ratio with the college loan is 31.%; without the
college loan it is 14.07%. According to the 20 percent rule, she cannot afford the college loan.
However, after Madeline pays off her credit card debts, her debt payments-to-income ratio with
the college loan will be 17.5 percent. Therefore, once she pays off her credit cards, she will be able
to afford the loan. [ANSWER: 19.48%]
5. Joshua 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? (LO5.4)
SOL: The finance charge on this loan is = 50+ 5= 55
6. In problem 5, Joshua borrowed $500 on January 1, 2014, and paid it all back at once on December
31, 2014. What was the APR? (LO5.4)
𝟐∗𝒏∗(𝑰𝒏𝒕+𝑭𝒆𝒆𝒔)
SOL: APR = = (2*1*(50+5))/(500*1*(1+1))=11%
𝑷𝒓𝒊𝒏𝒄𝒊𝒑𝒂𝒍∗(𝑵+𝟏)
Which is: n- No of pmt in 1 year
N- Total No of pmts to pay back all debt
7. If Joshua paid the $500 in 12 equal monthly payments, what is the APR? (LO5.4)
SOL: APR for 12 equal monthly pmts = 20.31%
8. Sidney took a $200 cash advance by using checks linked to her credit card account.
The bank charges a 2 percent cash advance fee on the amount borrowed and offers no grace period on
cash advances. Sidney paid the balance in full when the bill arrived.( trả 1 lần )
What was the cash advance fee? What was the interest for one month at an 18 per- cent APR? What was
the total amount she paid? What if she had made the purchase with her credit card and paid off her bill
in full promptly? (LO5.4)
SOL: Cash advance fee = 200*2%= 4
 The interest for one month at an 18% APR => APR Reverse => INT= 36 annual
=> INT monthly = 36/12 =3
Total she have to pay = 200+ 3 +4= 207
If Sydney had made the purchase with her credit card and paid off the bill in full promptly,
she would have paid only $200 ( if the card has a grace period, but if there is no grace period (and
some cards don’t offer one), she would have paid the $3 interest charge regardless and would have
saved only on the cash advance of $4.)

9. Brooke lacks cash to pay for a $600 washing machine. She could buy it from the store on credit by
making 12 monthly payments of $52.74 each. The total cost would then be $632.88. Instead, Brooke
decides to deposit $50 a month in the bank until she has saved enough money to pay cash for the
washing machine. One year later, she has saved $642—$600 in deposits plus interest. When she goes
back to the store, she finds that the washing machine now costs $660. Its price has gone up 10 percent—
the current rate of inflation. Was postponing her purchase a good trade-off for Brooke? (LO5.4)
SOL: NO. because price has increased to $660 which is quite higher than the price $638.88 that
she had to pay if she had taken 12 monthly payments option and cost of $52.74 as well as saving
done by Brooke $642 is also lower than the price of washing machine. Hence, it results in higher
because savings return were not equalized to trade-off inflation or price-rise that had incurred
over year.
10. What are the interest cost and the total amount due on a six-month loan of $1,500 at 13.2 percent
simple annual interest? (LO5.4)
SOL: Interest cost on a six- month loan= 1,500*13.2%*1/2= 99
Total Amount Due on a six month loan= 1500+ 99= 1599
11. After visiting several automobile dealerships, Richard 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. (LO5.4)
a. What is the total interest on Richard’s loan?
b. What is the total cost of the car?
c. What is the monthly payment?
d. What is the annual percentage rate (APR)?
SOL: a. The total interest on Richard’s loan = 8,000*11%*4= 3,520
b. Total cost of the car is 10,000+ 3,520= 13,520
c. Monthly pmt= (principal borrowed + int )/ Total No of pmts
= (8,000+ 3,520)/ 48
= 240
𝟐∗𝒏∗(𝑰𝒏𝒕+𝑭𝒆𝒆𝒔) 𝟐∗𝟏𝟐∗𝟑,𝟓𝟐𝟎
d. APR = APR = = =
𝑷𝒓𝒊𝒏𝒄𝒊𝒑𝒂𝒍∗(𝑵+𝟏) 𝟖,𝟎𝟎𝟎∗(𝟏𝟐∗𝟒+𝟏)
21.55%
CHAPTER 06
1. An item was bought on credit with a $60 down payment and monthly payments of $70 for 36
months. What was the total cost of the item?
SOL: Total cost of the item = 36*70 + 60= 2,580
2. A food package with 32 ounces costs $1.76. What is the unit cost of the package?
 SOL: The unit cost of the package = 1.76/ 32= $0.055/ ounce= 55 cents/ ounce
1. An online buying club offers membership for $300, for which you will receive a 10 percent discount
on all brand-name items you purchase. How much would you have to buy to cover the cost of
membership? (LO6.1)
SOL: You will have to buy 300/10%= 3,000 to cover the cost of membership
2. John Walters is comparing the cost of credit to the cash price of an item. If John makes an $80 down
payment and pays $35 a month for 24 months, how much more will that amount be than the cash
price of $685? (LO6.1)
SOL: Total cost when makeing an $80 down payment and pays $35 a month for 24
months is
= 80+ 35*24
= 920
That amount will be 920- 685= 235 more than the cash price of 685
3. Calculate the unit price of each of the following items: (LO6.1)
a. Motor oil—2.5 quarts for $1.95 78_____ cents/quart
b. Cereal—15 ounces for $2.17 14.46_____ cents/ounce
c. Canned fruit—13 ounces for 89 cents 6.8_____ cents/ounce
d. Facial tissue—300 tissues for $2.25 75_____ cents/100 tissues
4. A service contract for a video projection system costs $70 a year. You expect to use the system for
five years. Instead of buying the service contract, what would be the future value of these annual amounts after
five years if you earn 3 percent on your savings? (LO6.1)
SOL: PMT= 70
N= 5 FV= 371.64
R= 3%
FV =?
5. A work-at-home opportunity is available in which you will receive 3 percent of the sales for
customers you refer to the company. The cost of your “franchise fee” is $600. How much would your customers
have to buy to cover the cost of this fee? (LO6.1)
SOL: your customers have to buy to cover the cost of this fee
600/3%= 20,000
6. What would be the net present value of a microwave oven that costs $159 and will save you $68 a
year in time and food away from home? Assume an average return on your savings of 4 percent for five years.
(Hint: Calculate the present value of the annual savings, then subtract the cost of the microwave.) (LO6.1)
SOL: C0= 159
Cf1 to 5 = 68 PV of CF1-5= 302.72
R= 4% => NPV= PV- C0
N= 5 = 302.72- 159
NPV= ? = 143.72
 7. If a person saves $62 a month by using coupons and doing comparison shopping,
( a ) what is the amount for a year?
( b ) What would be the future value of this annual amount over 10 years, assuming an interest rate of 4
percent? (LO6.1)
SOL: a. Amount for a year = 62* 12= 744
b. PMT= 744
N= 10 FV= 8,932.54
R= 4%
FV= ?
8. Based on financial and opportunity costs, which of the following do you believe would be the wiser
purchase? (LO6.2)
Vehicle 1: A three-year-old car with 45,000 miles, costing $16,700 and requiring $1,385 of immediate
repairs.
Vehicle 2: A five-year-old car with 62,000 miles, costing $14,500 and requiring $1,760 of immediate
repairs.
SOL: Vehicle 1: Younger car, less mileage, more money down
Vehicle2: Older car, more mileage, less money down
9. Based on the following data, prepare a financial comparison of buying and leasing a motor vehicle
with a $24,000 cash price:
Down payment (to finance vehicle), Down payment for lease, $1,200
$4,000 Monthly lease payment, $440
Monthly loan payment, $560 Length of lease, 48 months
Length of loan, 48 months End-of-lease charges, $600
Value of vehicle at end of loan, $7,200
What other factors should a person consider when choosing between buying and leasing? (LO6.2)
SOL: Buying: 4,000+ (560* 48)- 7,200= 23,680
Leasig: 1,200+ (440* 48)+ 600= 22,920
10. Based on the data provided here, calculate the items requested: (LO6.2)
Annual depreciation, $2,500 Annual mileage, 13,200
Current year’s loan interest, $650 Miles per gallon, 24
Insurance, $680 License and registration fees, $65
Average gasoline price, $3.50 per Oil changes/repairs, $370
gallon
Parking/tolls, $420

a. The total annual operating cost of the motor vehicle.

b. The operating cost per mile.
 SOL: a. Total annual operating cost of the motor vehicle= 2,500+ 650+ 680+ 65+ 13,200/ 24* 3.5+
420+ 370= 6,610
B The operating cost per mile = 6,610/ 13,200= 0.501.
11. Based on the following, calculate the costs of buying versus leasing a motor vehicle. (LO6.2)
Purchase Costs Leasing Costs
Down payment, $1,500 Security deposit, $500
Loan payment, $450 for 48 months Lease payment, $450 for 36 months
Estimated value at end of loan, $4,000 End-of-lease charges, $600
Opportunity cost interest rate, 4
percent
SOL: Buying: 1,500+ 450* 48 -4,000+ 1,500*4*4%= 19,340
1500*4* 4% : chi phis co hoi neu dung 1500 dau tu vao bank
Leasing: 450* 36+ 500*3*4%+ 600= 16,860
12. A class-action suit against a utility company resulted in a settlement of $1.4 million for 62,000
customers. If the legal fees, which must be paid from the settlement, are $300,000, what amount will each
plaintiff receive? (LO6.4)
SOL: Each plaintiff will receive = (1,400,000- 300,000)/ 62,000= 17.74