7:05 Assignment: Open Response 8 (50 Points) Answer each of the following. If you are typing, be sure to save this in Rich Text Format, .rtf. Loans and Credit In this open response, you are going to pretend to be buying a high priced item using credit of different kinds. We are going to compare the cost of each and come to a conclusion. I. Find Your Item (5 pts) Using the links below, or one of your choosing, find an item you would like to buy in the $300 to $700 range. List the item in the table provided. Even though you would normally include tax, shipping and handling, we will ignore these in this exercise. Name of Item Special details Site where you found it Price LINKS: http://www.bestbuy.com http://www.sony.com/ http://www.tiffany.com/ http://www.zales.com/ II. Month Balance Interest Option 1: Use Your Credit Card (15 pts) You have a Maxi Card with a $700 limit for this exercise. The card has a monthly finance charge of 1.67%. Fill out the following table. Your payment each month is $50. You are finished when you have paid it off. Each month, except the first: Balance last month's new balance payment Monthly Finance Charge = balance (0.0167) New balance balance + monthly finance charge New Balance Payment 12345678 Month Balance 9 10 11 12 13 14 15 16 Total Interest New Balance Payment Option 2: Get a Bank Loan (10 pts) You visited a local bank. Because of your good credit, they agreed to give you a personal loan, simple interest, at the current interest rate of 12.5% APR. You will pay this back in 1 year. AA static.k12.com 7:05 | Month Balance 9 10 11 12 13 14 15 16 Total Interest $ New Balance Payment $ Option 2: Get a Bank Loan (10 pts) You visited a local bank. Because of your good credit, they agreed to give you a personal loan, simple interest, at the current interest rate of 12.5% APR. You will pay this back in 1 year. Interest = prt= Total Payment = Principal + Interest = Payment per month = Total Payment / 12 = III. Option 3: Installment Plan (10 pts) The store you are buying the item down offers you an installment plan. The terms of the contract for the plan are: $50 down 12 payments Finance charge of $100 Interest Finance Charge: Total Payment = Cost of item + Finance charge = Monthly Payment: = (Total Payment - Down payment / 12 = IV. Time to Choose! (10 pts) Compare the three options. a. Which is the most convenient? b. Which has the shortest payment time? C. Which has the lowest total payment and interest? d. Which has the lowest monthly payment? e. Make a choice. Assuming that you could not pay for your item any other way, which would you choose and why? Your reasons why may incorporate a, b, c, and d, but may also include other reasons. static.k12.com