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7 . 2 . Cody Gets His Outback Cody Andrews, a 2 7 - year - old living in Richmond, Virginia, has been a high
Cody Gets His Outback
Cody Andrews, a yearold living in Richmond, Virginia, has been a highschool teacher for years. For the past four months, he's been thinking about buying a Subaru Outback, but he feels that he can't afford a brandnew one. Recently, however, his friend Devin Carpenter has offered to sell Cody his fully loaded Subaru Outback. Devin wants $ for his Outback, which has been driven only miles and is in very good condition. Cody is eager to buy the vehicle but has only $ in his savings account at Central Bank. He expects to net $ from the sale of his Chevrolet Malibu, but this will still leave him about $ short. He has two alternatives for obtaining the money:
a Borrow $ from the First National Bank of Richmond at a fixed rate of
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Applying Personal Finance
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the sale of his Chevrolet Malibu, but this will still leave him about $ short. He has two alternatives for obtaining the money:
a Borrow $ from the First National Bank of Richmond at a fixed rate of percent per annum, simple interest. The loan would be repaid in equal monthly installments over a year month period.
b Obtain an $ installment loan requiring monthly payments from the Richmond Teacher's Credit Union at a perchnt stated rate of interest. The addon method would be used to calculate the finance charges on this loan.
CRITICAL THINKING QUESTIONS
Using a financial calculator or a spreadsheet, determine the required
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Part Managing Insurance Needs
CRITICAL THINKING QUESTIONS
Using a financial calculator or a spreadsheet, determine the required monthly payments if the loan is taken out at First National Bank of Richmond.
Compute a the finance charges and b the APR on the loan offered by First National Bank of Richmond.
Determine the size of the monthly payment required on the loan from the Richmond Teacher's Credit Union.
Compute a the finance charges and b the APR on the loan offered by the Richmond Teacher's Credit Union.
Compare the two loans and recommend one of them to Cody. Explain your recommendation.
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