Financial Math Chapter 7 and 8 Test Review

Steph's credit card statement shows a previous balance of $120.00 with finance charges in the amount of $5.00. If he made new purchases in the amount of $48.00 and made a $25.00 payment, what is his new balance?

• $138

• $95

• $148

• $115

Answer explanation

The formula for finding a new balance is:

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Ch 7

Stores will offer credit cards (charge accounts) to customers in order to generate ___________________?

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Ch 7

Jimmy charged a new flat screen tv on his credit card. If the cost of the tv was $850.00 and the monthly finance charge is 2.95% of the unpaid balance, how much did Jimmy pay in interest?

• $2507.50

• $25.08

• $847.05

• $250.75

Answer explanation

To calculate finance charges, multiply

cost of item x finance charge

make sure to move the decimal over 2 places to the left on the percentage

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Ch 7

The "average daily balance method" calculates your finance charges (interest) by adding new purchases to the balance, then dividing by the number of days in the month...

• True

• False

Answer explanation

This is from section 7.3 and can be found in your notes, or section 7.3 of the text book in the first couple of paragraphs.

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Ch 7

This type of loan can be paid back in equal payments over a period of time.

Answer explanation

An installment loan can be paid back over a period of time in equal payments.

A single payment loan must be paid back all at once when the loan is due.

The card shown, is an example of a...

• A credit card

• A charge account

Answer explanation

This would be a charge account because it can only be used at GAP.

A credit card must have either a VISA or MasterCard logo in the bottom corner.

So if this GAP card also had a VISA or MasterCard logo at the bottom, it would then be considered a credit card because you could use it at GAP or any other place credit cards are accepted.

Jessica is buying a new refrigerator for $1,350.00 to put in her apartment. She plans to put $500.00 as a down payment. How much did she finance?

• $850.00

• $500.00

• $1850.00

• 500%

Answer explanation

To get the amount financed, get the price of the item being purchased and subtract the amount of the down payment.

You are planning to buy a new sofa set for your apartment. The cost of the sofa set is $3,475.00. If you plan to put down 20%, how much cash are you putting down?

• 20%

• $86875.00

• $69.50

• $695.00

Answer explanation

To get the down payment when the down payment is a percent:

Change the percent to a decimal by moving it 2 places to the left, then multiply by the cost of the item.

How do I find the maturity value of my loan?

• Find the down payment, then subtract this amount from the cost of the item you purchase.

• Add the amount of interest and the down payment together.

• The maturity value is when you add the interest and principal together.

• Take the principal and subtract the amount of interest.