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Understanding Loan Payments and Annuity Calculations for Financial Planning

This guide explores consumer financing through loans and annuities, illustrated by Jenna's purchase of a bedroom set for $3,700 with 9.8% add-on interest. We will calculate monthly payments based on a 36-month term and analyze Sophie Jones’s average daily balance and finance charges on her Sears account within a billing period of March 1 to March 31. Additionally, we will examine John Smith's tax-deferred annuity contributions, future value, and total interest earned over time, providing a comprehensive overview of financial decision-making.

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Understanding Loan Payments and Annuity Calculations for Financial Planning

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  1. Consumer Loans and Annuities

  2. Jenna buys a bedroom set at Fowler’s Furniture for $3,700. She puts $500 down and finances the rest through the store at 9.8% add-on interest. If she agrees to make 36 monthly payments, find the size of each payment.

  3. The activity on Sophie Jones’s Sears account for one billing period is shown below. Find the average daily balance and the finance charge if the billing period is March 1 through March 31. The previous balance was $157.14, and the annual interest rate is 21%.

  4. Formulas Ordinary Annuity Formula

  5. John Smith recently set up a tax-deferred annuity to save for his retirement. He arranged to have $50 taken out of each of his biweekly checks; it will earn annual interest. He just had his thirtieth birthday, and his ordinary annuity comes to term when he is sixty-five. Find the following: • the future value of the account • John’s total contribution to the account. • the total interest

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