Week $8$ Assignment Practical Applications

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Practical Application $1$

Let's assume you purchased a new car and financed it through the dealer. The purchase price was $$30,000$ including all fees, taxes and delivery costs.

The dealer offered an 'all inclusive' financing plan at a $12\%$ rate. Your $30$ monthly payments were $$1,300,$ derived by adding interest of $$9,000$ to the $$30,000$ and dividing by $30$ monthly payments.

Your friends tell you that your interest rate is above $20\%$ and that you should have borrowed from your home equity line at a lower rate. Are they right?

Practical Application $2$

Part A

You wish to purchase a home and have been very successful in saving $$12,000$ for a down payment.

You can get a $30$ year mortgage at a fixed rate of $11\mathrm{.}5\%.$ The most you can afford is $$\frac{630}{?}$ month for payment.

What's the maximum you can pay for a house?

Part B

You plan to be married soon and your partner can contribute $$\frac{250}{?}$ month toward the monthly payment, but nothing toward the down payment.

Now what price can you afford to pay?

Part C

You have learned of a special bank offer to first$-$time home buyers. Interest rates will be dropped to $9\%$ for the life of the mortgage.

Now, what can you afford to pay?

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