Chapter 7 Financial Planning Exercise 10 Comparing payments and APRs of financing alternatives

Because of a job change, Finn McBryde has just relocated to the southeastern United States. He sold his furniture before he moved, so he's now shopping for new furnishings. At a local furniture store, he's found an assortment of couches, chairs, tables, and beds that he thinks would look great in his new, two-bedroom apartment; the total cost for everything is $6,400. Because of moving costs, Finn is a bit short of cash right now, so he's decided to take out an installment loan for $6,400 to pay for the furniture. The furniture store offers to lend him the money for 48 months at an add-on interest rate of 8.5 percent. The credit union at Finn's firm offers to lend him the money - they'll give him the loan at a simple interest rate of 11.5 percent, but only for a term of 18 months.

Compute the monthly payments for the loan from the credit union. Round the answer to the nearest cent. $ per month ________________

Determine the APR for the loan from the credit union. Round the answer to 2 decimal places. % ______________________

Compute the monthly payments for the loan from the furniture store. Round the answer to the nearest cent. $ per month ____________________________

Determine the APR for the loan from the furniture store. Round the answer to 2 decimal places. % ______________________

Which is more important: low payments or a low APR? -Select-low paymentslow APRItem 5