Buddy Holly will sell you the Big Bopper for $40,000. The deal is you pay for the Big Bopper in three equal annual payments that include interest at 4%. You put no money down and the first payment is not due until one year from today!! You called the bank and they said that they would charge you 10% for a similar loan. How much are the payments if you take Buddy's deal?

$ 11,200.00

$ 10,810.46

$ 12,063.44

$ 14,413.94

None of the above

QUESTION 2 How much are you really paying for the Big Bopper under Buddy's deal?

$ 35,845.34

$ 26,884.01

$ 30,000.00

$ 36,190.32 None of the above

QUESTION 3 If you amortize the Buddy deal properly, the interest for the first year would be $ 3,584.53 $ 3,000.00 $ 2,688.40 $ 1,200.00 None of the above

QUESTION 4 John is buying a new gas grill. The price is $550. The dealer told John that if he put $50 down, he could finance the balance and make 3 interest only payments at just 2%. He would pay the balance at the end of the 3rd year. John called the bank and they told him the normal interest for gas grill purchases was 10%. How much are the payments?

$11.00

$10.00

$173.38

$ 58.38

None of the above

QUESTION 5 Still on John. If John took the dealer's deal, how much is he really paying for the grill? Be careful!

$ 550.00 $ 440.58 $ 400.53 $ 450.53 $ 481.17