Year+7+-+Week+3+-+HWOO

NEVER A BORROWER NOR A LENDER BE

All working should be shown, you may use a calculator but the sum must be written in your book.

TASK 1:

Calculate the annual percentage rate for the following:

1. $1,000 borrowed for 4 months, repayment $1,000 plus $24.

2. $3,000 borrowed for 6 months, repayment $3,000 plus $315.

3. $50 borrowed for 5 days, repayment $50 plus $5.

TASK 2:

A. I spend $1,000 on my credit card and repay $100 each month. The interest rate on my credit card is 18%.  How many months will it take me to clear the debt and how much will I pay the credit card company in total.

For part B, you may either work out the interest yearly, using a calculator and writing several example sums with method in your book or you may use a spreadsheet on a computer and work out the interest monthly (preferred option). If you use a spreadsheet, you must still write the method used to calculate consecutive entries into your book and a copy of the spreadsheet must be stuck in your book.

B. I purchase a $650,000 house, take out a mortgage of $600,000 and repay $6,000 a month. How long will it take me to replay the loan at (i) 5% interest per year (ii) 10% interest per year and how much will I repay in total in each case. What would happen if I continued to repay $6,000 a month and the interest rate increased to 15% per year?

EXTENSION:

C. Compare the costs of using a credit card to borrow money against using a bank loan or another option. Consider both total repayments and the time it takes to repay a loan.

Students are expected to complete up to and including Task 2B as a minimum; work is due Friday 26th September