Question
Peg Gasperoni bought a $50,000 life insurance policy for $100 per year. Ryan Life Insurance Company sent her the following billing instructions along with a
Peg Gasperoni bought a $50,000 life insurance policy for $100 per year. Ryan Life Insurance Company sent her the following billing instructions along with a premium plan example:
"Your insurance premium notice will be mailed to you in a few days. You may pay the entire premium in full without a finance charge or you may pay the premium in installments after a down payment and the balance in monthly installments of $30. The finance charge will be added to the unpaid balance. The finance charge is based on an annual percentage rate of 15%."
| If the total policy premium is: | And you put down: | The balance subject to finance charge will be: | The total number of monthly installments ($30 minimum) will be: | The monthly installment before adding the finance charge will be: | The total finance charge for all installments will be: | And the total deferred payment price will be: |
| $100 | $30.00 | $ 70.00 | 3 | $30.00 | $1.75 | $101.75 |
| $200 | $50.00 | $150.00 | 5 | $30.00 | $5.67 | $205.67 |
| $300 | $75.00 | $225.00 | 8 | $30.00 | $12.84 | $312.84 |
Peg feels that the finance charge of $1.75 is in error. Check your answer.
a. What is the actual finance charge for the first three months? (Round your answer to the nearest cent.)
Finance Charge $
b. Is she correct?
| Yes | |
| No |
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Finance With Monte Carlo
Authors: Ronald W. Shonkwiler
2013th Edition
146148510X, 978-1461485100
