Question: Read the situation and using the information provided, structure two loan options for the Smiths. Adam and Marie Smith are trading in their automobile for
Read the situation and using the information provided, structure two loan options for the Smiths.
Adam and Marie Smith are trading in their automobile for a new one and need an additional $8,500 for the new auto, plus $1,500 to pay off the balance on the old auto's loan.
They have the following debts:
| LOAN | Monthly Payment | Balance | APR | Term | |
| Second Mortgage | $175 | $9,000 | 12.5% | 120 months | |
| Boat | 350 | 17,500 | 13.0 | 120 months | |
| Automobile | 125 | 1,500 | 9.5 | revolving | |
| Visa | 20 | 400 | 18.0 | revolving | |
| MasterCard | 45 | 900 | 18.0 | revolving | |
| Department Store | 15 | 300 | 21.0 | revolving | |
| Department Store | 25 | 500 | 16.0 | revolving | |
| TOTAL | $755 | $30,100 |
|
| |
METRO City Bank Rate Sheet
| Loan type | Term | Collateral | APR |
| New Auto | 48 months | New auto | 6.5% |
| New Auto | 60 months | New auto | 7.5% |
| Home equity, fixed-rate closed-end | Up to 120 months | Home | 6.0% |
Option A:
Option B:
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