6-1



Name ____________________________ Ch 6 Review

Borrowing to Buy a Home

1. Mary Ann bought a home for $125,000. She made a 12% down payment and borrowed the rest on a 25-year, 8.8% fixed-rate mortgage. Her monthly mortgage payment was $908.10.

a. How much was the down payment Agnes made?

b. How much did she borrow on the mortgage?

c. What is the total amount of the monthly payments Agnes expects to pay over the life of the loan?

d. What is the amount of interest Agnes will pay over the 25-year loan term? $

2. The Cosby’s bought a home for $162,500. They made a 5% down payment and borrowed the rest on a 7.4%, 30-year fixed rate mortgage. Their monthly payment was $1,068.86.

a. How much was the down payment they made?

b. How much was the amount of their mortgage?

c. What was the total amount of their monthly payments over 30 years?

d. What was the amount of interest they paid over the life of the loan?

3. The Clark's old mortgage payment was $855.78 a month. Their new monthly payment is $719.40. To refinance, they had to pay $714 in closing costs and $390 in prepayment penalties. What was the net amount they paid less in the first year with the new mortgage?

Renting or Owning a Home

4. The Miller’s want to buy a condominium. They estimate that their expenses in the first year will be: mortgage interest, $4,964; real estate taxes, $1,795; insurance, $386; association fees, $840; depreciation, $1,781; maintenance, $300; utilities, $1,200; and lost income on cash invested, $525. They also estimate they will save $1,400 in income taxes because of increased tax deductions.

a. What were the total expenses of condo ownership for the first year?

b. What was the net cost of owning the condo in the first year?

5. The Johnson’s bought a lot several years ago for $22,000. On the lot they own, they are now building a home that will cost $140,000. The Herndons will pay for the home by taking $25,000 from savings and borrowing the rest. First-year expenses are estimated to be: mortgage interest, $9,100; depreciation, 2.25% of the home's cost; property taxes, $2,890; insurance, $645; lost interest income, $720; maintenance, $1,350; and utilities, $1,900. Income tax savings are estimated to be $3,025.

a. What will be the Herndon's cost of owning the home in the first year?

b. What will be the net cost of home ownership in the first year?

6. Cory is moving to another city. The cost of a one-bedroom apartment within a one-hour drive of the downtown area where he will work is $1,150 per month. The cost of utilities is expected to average $200 a month. Renters insurance would cost $175 a year. The least expensive home in good condition that Cory can find to buy costs $140,000. Annual expenses of owning the home will be property taxes, $3,240; mortgage interest, $11,520; depreciation, $2,800; maintenance and repairs, $2,600; insurance, $890; and lost interest on investment, $350. Estimated income tax savings of home ownership are $4,000. Will it be less expensive for Cory to rent or to buy, and how much less?

Property Taxes

7. A school district is located in a city that has property with an assessed value of $105,600,000. The school budget for the coming year shows that $3,800,000 will be needed to operate the schools. Of this amount $450,200 will be received from state and federal governments,

a. a. What is the amount to be raised by taxes on local property owners?

b. b. What will be the tax rate, shown as a decimal rounded to three places?

8. Find the amount to be raised by property tax and the tax rate for each exercise. Show the tax rate as a decimal, correct to four places.

| |Assessed Value |Total Expenses |Other Income |Raised by Property Tax |Tax Rate |

|a. |$31,050,000 |$1,285,000 |$113,100 | | |

|b. |$41,400,000 |$1,140,000 |$126,750 | | |

|c. |$26,162,000 |$497,000 |$88,920 | | |

|d. |$9,085,000 |$514,900 |$59,100 | | |

9. Property worth $114,000 is assessed at 40% of its value. The property tax rate is $34.248 per $1,000 of assessed value. What is the tax on the property?

Property Insurance

10. Donny’s home is insured for its value of $125,000, at a rate of $0.40 per $100.

a. What is the total annual premium for this coverage?

b. Her insurance company will deduct 2% from her annual premium if she installs smoke detectors or will deduct 6% if she installs a fire alarm system connected to the local fire station. If Delphia installs smoke detectors, how much annual premium will she pay?

c. If a fire alarm system is installed instead, what would Delphia's annual premium be?

11. Scott rents an apartment and insures its contents with a renter's policy. The value of the contents is $15,300, and the premium is $0.86 per $100. What is Scott's annual premium?

12. A fire caused $1,810 damage to the Jackson family's kitchen. The Jackson's homeowner's insurance policy had a $250 deductible. Of the total damages, how much will the insurance company pay?

Buying a Car

13. Bernie plans to buy an Ford four-door car with a MSRP of $21,040. The optional features Bernadine is considering and their suggested prices follow: alarm system, $415; larger tires, $84; accent stripes, $280; leather seats, $720; and extended warranty, $625. At the car dealer's showroom she decides to add only the alarm system and extended warranty options to the basic Alaris car. What is the MSRP of the car and the options selected?

14. Neil bought a car with an MSRP of $31,248. A 5% sales tax will be charged on the total purchase. Registration and license costs will be $110. Nelson plans to make a $3,000 down payment,

a. What is the delivered price of the car?

b. What is the balance due on this purchase?

15. A two-year old car was placed on sale for $17,450. Herschel Cole made an offer to buy the car for $16,900, which the seller accepted. The sale of the car is subject to a 5.4% sales tax. Registration fees will be $45. New license plates will cost $87. What will be the delivered price of the car?

16. Bruce bought a four-year old car for $8,060 from a used car dealer. Bryce also purchased a one-year, 12,000 mile limited warranty for $250 through the dealer. Sales tax of 4% is charged on the purchase except for the warranty that is exempt from state sales tax. Bryce plans to make a down payment of 20% of the car's delivered price and take a loan for the balance,

a. What is the delivered price of the used car?

b. What is the balance due on the purchase?

Car Purchases and Leases

17. Being able to borrow money at a special interest rate of 3.3% was one of the reasons why Otto Kubik bought a new truck. The truck cost $19,865. Otto made a down payment of $1,865 and took a 48-month loan with payments of $405.76 monthly,

a. What was the total amount Otto paid for the truck?

b. How much did he pay in finance charges?

18. Suzanne Madigan leased a car for four years and drove the car 72,000 miles. Her monthly lease charge was $380.61. The leasing company charged $0.21 a mile for all miles driven over 60,000 miles. In addition, Suzanne had to pay a charge of $518.76 to repair a damaged door.

a. Find the total of the monthly lease charges,

b. What was the amount of the excess mileage charges?

c. What was the total cost of leasing the car?

19. Foster Pruett leased a van on a 36-month contract at $418.53 per month. The lease terms allowed him 12,000 miles a year. Foster also purchased 7,500 extra, non-refundable miles at $.09 a mile. In addition, he had to pay a $160 lease processing fee and a $750 down payment. Foster drove the van 40,162 miles in 36 months,

a. What was the total of the monthly lease payments?

b. What was the total cost of the extra miles purchase?

c. What were Foster's total lease costs for the 36 months?

20. The 48-month lease terms on a truck that costs $20,650 are $340.11 monthly with a $650 down payment. The truck has an estimated residual value of $9,200. The truck may be purchased for a $2,780 down payment and 48 monthly payments of $448.93.

a. What were the total costs of leasing?

b. What were the total costs of buying?

c. Is it more expensive to lease or buy the truck, and how much more expensive?

21. A 48-month lease plan on a luxury car that costs $46,700 consists of a $2,875 down payment, monthly payments of $594.80, and a residual value of $28,400. A purchase plan for the car requires a down payment of $3,250 and a 4-year loan with monthly payments of $1,082.

a. What is the total cost of leasing?

b. What is the total cost of purchasing?

c. Which plan gives the lowest total cost?

d. What is the difference in the plans over four years?

22. Orville Sewell leased a car for one year and drove it 21,854 miles. He spent $710 for insurance, $203.60 for maintenance, $1,420.51 for gas, $452 for a down payment, and $107 for registration and license fees. The leasing company charged $860 a month plus $.19 a mile for each mile driven over 15,000 miles in a year.

a. What was the total cost of operating the car for a year?

b. What was the operating cost per mile, to the nearest cent?

Depreciating a Car

23. Noreen Tyson bought a new car for $ 19,560. She used the car three years and then traded it in for $10,200.

a. What was the total depreciation for the three-year period?

b. What was the average annual depreciation?

24. A wholesale company sold one of its trucks for $5,200. The truck cost $26,795 when it was bought seven years ago.

a. What was the total depreciation on the truck for the seven-year period?

b. What was the average annual depreciation?

c. What was the average annual rate of depreciation, rounded to the nearest tenth percent?

25. Nanette bought a four-wheel drive truck for $24,920. She used the truck for five years and then traded it in for $6,030.

a. a. What was the average annual depreciation?

b. b. What was the average annual rate of depreciation, rounded to the nearest tenth percent?

Cost of Owning a Car

Annual Insurance Premiums

| | |Vehicle Used For |

|Type of |Coverage |Pleasure |Driving | |

|Insurance Coverage |Limits |Use Only |to Work |Business |

|Bodily Injury |$25/$50,000 |24.70 |27.42 |35.65 |

| |$50/$ 100,000 |37.06 |41.14 |53.48 |

| |$100/$300,000 |64.74 |71.86 |93.42 |

| |$200/5500,000 |82.54 |91.62 |119.11 |

|Property Damage |$25,000 |162.96 |180.89 |235.16 |

| |$50,000 |194.00 |215.34 |279.94 |

| |$100,000 |228.23 |253.33 |329.33 |

|Collision |$100 deductible |559.84 |621.42 |807.85 |

| |$250 deductible |478.12 |530.71 |689.92 |

| |$500 deductible |422.34 |468.80 |609.44 |

|Comprehensive |$100 deductible |150.38 |166.92 |216.00 |

| |$250 deductible |128.64 |142.79 |185.63 |

| |$500 deductible |105.38 |116.98 |152.07 |

26. Rebecca Keyes owns an appliance repair company and uses her truck for business. She carries bodily injury coverage for $200/$500,000; property damage coverage for $50,000; collision, $100 deductible; and comprehensive, $100 deductible,

a. For this coverage, what is her annual premium?

b. If she chose a $500 deductible for both collision and comprehensive, what is her annual premium be?

c. By taking the higher deductibles how much would she save annually on truck insurance?

27. A truck used primarily for work on a farm is sometimes used to deliver produce to markets. The truck is insured as being used for business. The truck is insured for the least amount of bodily injury and property damage insurance and for the highest deductibles for collision and comprehensive coverage. Because it is primarily a farm vehicle, a 15% discount is given off the regular annual premium.

a. What is the premium before any discounts are given?

b. What is the discount amount?

c. What is the annual premium to be paid?

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