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## Help with Credit and Loans Practice test questions

1. Lynn had a \$2,000 personal loan at 9.5 % for 18 months. Suppose that she is given the choice between the level method and the rule of 78 method and that she wants to pay off the remaining balance after a year of making monthly payments. Which method would she choose, and what difference in interest would she pay?

2. How long will it take Kate to pay for her furniture set if she chooses to pay only the minimum monthly payment of 2% of the outstanding balance? Her furniture set cost \$3,750 financed at 19.75% annual interest.

3. Calculate the average daily balance (ADB) and the finance charge on Drew’s account that has 9.5% APR and a 30-day billing cycle. His January statement shows:
\$425.89 balance carried from December
\$133.15 K-Mart charge on January 5
\$76.95 Greek Cuisine restaurant charge on January 8
\$150.00 payment paid on January 10
\$25.25 Texaco gas charge on January 11
\$33.15 Target charge on January 21
\$80.00 health club charge on January 26
\$17.85 Wal-Mart charge on January 28