Carmen’s Beauty Salon has estimated monthly financing requirements for the next
ID: 2820648 • Letter: C
Question
Carmen’s Beauty Salon has estimated monthly financing requirements for the next six months as follows: January $ 10,200 April $ 10,200 February 4,200 May 11,200 March 5,200 June 6,200 Short-term financing will be utilized for the next six months. Projected annual interest rates are: January 6 % April 13 % February 7 May 12 March 10 June 12
a. Compute total dollar interest payments for the six months. (Round your monthly interest rate to 2 decimal places when expressed as a percent. Round your interest payments to the nearest whole cent.) Total Dollar Interest Payments
b-1. Compute the total dollar interest payments if long-term financing at 12 percent had been utilized throughout the six months? (Round your monthly interest rate to 2 decimal places when expressed as a percent. Round your interest payments to the nearest whole cent.) Total Dollar Interest Payments
b-2. If long-term financing at 12 percent had been utilized throughout the six months, would the total-dollar interest payments be larger or smaller than with the short-term financing plan?
Explanation / Answer
a).
Monthly
Rate
Amount
Financed
Monthly
Interest
b-1).
Monthly
Rate
Amount
Financed
Monthly
Interest
b-2). Total dollar interest payments would be larger under the long-term financing plan.
Month RateMonthly
Rate
Amount
Financed
Monthly
Interest
January 6% 0.5% $10,200 $51 February 7% 0.58% $ 4,200 $24.50 March 10% 0.83% $ 5,200 $43.33 April 13% 1.08% $10,200 $110.50