Question $1$

Jaime needs to buy a new refrigerator for his apartment. He found what he needed for

$$1,300$ at a well$-$known appliance store. The store is offering two options for Jaime to

finance the appliance:

Option I: A store credit card with a $$1,500$ limit:

$1)$ The credit card charges $16\mathrm{.}5\%$ annual interest rate.

$2)$ The minimum monthly payment is $$100$ plus the monthly

finance charge.

$3)$ No down payment required

$4)$ The loan is expected to be paid off in $12$ months to avoid

additional penalties.

Option II: The appliance store offers an installment loan for his purchase:

$1)$ Loan charges a simple interest rate of $12\mathrm{.}5\%.$

$2)$ Loan must be paid off in $12$ equal payments to avoid penalties.

$3)$ A $$300$ down payment is required.

A$.$ Which Option should Jaime choose if he wants the interest he pays to be as

small as possible?

B$.$ How much interest paid will he save by choosing this option?

C$.$ Complete the monthly payment table for Option I and calculate the total interest

paid:

A B C D E F

Payment

Number

Beginning

Monthly

Principle

Balance

Monthly

Interest

Rate

Interest

Paid

Monthly

Payment

Ending

Monthly

Balance

$1$ $$1,300\mathrm{.}00$ $$17\mathrm{.}88$ $$117\mathrm{.}88$

$2$ $$1,182\mathrm{.}13$ $$16\mathrm{.}25$ $$116\mathrm{.}25$

$3$ $$1,065\mathrm{.}88$ $$14\mathrm{.}66$ $$114\mathrm{.}66$

$4$ $$951\mathrm{.}22$ $$13\mathrm{.}08$ $$113\mathrm{.}08$

$5$ $$838\mathrm{.}14$ $$11\mathrm{.}52$ $$111\mathrm{.}52$

$6$ $$726\mathrm{.}62$ $$9\mathrm{.}99$ $$109\mathrm{.}99$

$7$

$8$

$9$

$10$

$11$

$12$

$$ Interest paid for Option I: $\_\_\_\_\_\_\_\_\_\_\_$

$$ Calculate the interest paid for Option II: $\_\_\_\_\_\_\_\_\_\_\_$

Question $2$

What are the other considerations and factors that could influence the option he

chooses? Select as many that apply.

A$.$ What the monthly payment is for each option

B$.$ The depreciation on the appliance over the next year

C$.$ The amount of the down payment required

D$.$ Fees and penalties for late payments

E$.$ The manufacturer$$s warranty on the refrigerator

F$.$ Conditions for defaulting on the loan