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Math 101 Group Activity 20: Loans and Credit Cards A. Suppose you are buying a car and want to borrow $20,000 over a 5-year period at an annual percentage rate of 7.5%. 1. Use the PMT function in Excel to determine your monthly payment. 2. Determine the total amount paid over the term of the loan (interest and principal). (Show work.) 3. Determine how much you will pay in interest over the term of the loan. (Show work.) B. You make a purchase for $2,800 on your credit card which has an annual interest rate of 19%. You pay the minimum payment of 2% per month (not less than $25), and make no additional purchases on your card. Set up an Excel spreadsheet with an amortization table for this loan. It might look like: Credit card balance at Payment at end of Interest for Credit card balance at Month beginning of month month month end of month 1 $2,800.00 =MAX(B2*0.02,25) =B2*0.19/12 =B2-C2+D2 2 =E2 =MAX(B3*0.02,25) =B3*0.19/12 =B3-C3+D3 4. What is your credit card balance after 1 year? Copy the first twelve rows of your table into your Word document. 5. If you only paid the minimum each month (and didn't make any additional purchases), how long would it take to pay off the balance? Copy the last two rows from your table into your Word document. 6. How much interest would you pay altogether? C. You only use your credit card in the case of an emergency. You charge $2,000 in auto repairs to credit card which has an annual interest rate of 9.99%. 7. Use the PMT function to determine what your monthly payment should be if you would like to pay off your balance in full after one year. 8. What would be your total payments on the credit card loan? (Show work.) D. You take a vacation once a year and charge it to your credit card and pay it off in 6 months. You have the option to apply two credit cards. Credit card A has an annual rate of 9.99% with no annual fee and credit card B has an annual rate of 8.99% with a $20 annual fee. The total cost of your vacation was $3,350. 9. a) Use the PMT function to determine your monthly payment with credit card A. b) What is the total from the six monthly payments with credit card A? c) How much will you pay in interest and fees with credit card A? 10. a) Use the PMT function to determine your monthly payment with credit card B. b) What is the total from the six monthly payments with credit card B? c) How much will you pay in interest and fees with credit card B? 11. Which credit card do you choose?
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