Robert Sampson owns a $191,000 townhouse and still has an unpaid mortgage of $156,000. In addition to his mortgage, he has the following liabilities:

Visa $ 785

MasterCard 440

Discover card 585

Education loan 3,100

Personal bank loan 500

Auto loan 5,500

Total $ 10,910

Robert's net worth (not including his home) is about $45,000. This equity is in mutual funds, an automobile, a coin collection, furniture, and other personal property.

a. What is Robert's debt-to-equity ratio? (Round your answer to 2 decimal places.)

b. Has he reached the upper limit of debt obligations? After visiting several automobile dealerships, Richard selects the car he wants. He likes its $11,000 price, but financing through the dealer is no bargain. He has $2,200 cash for a down payment, so he needs an $8,800 loan. In shopping at several banks for an installment loan, he learns that interest on most automobile loans is quoted at add-on rates. That is, during the life of the loan, interest is paid on the full amount borrowed even though a portion of the principal has been paid back. Richard borrows $8,800 for a period of four years at an add-on interest rate of 8 percent.

a. What is the total interest on Richard's loan?

b. What is the total cost of the car?

c. What is the monthly payment?

d. What is the annual percentage rate (APR)? a.

I = P × r × T

= $8,800 × 0.08 × 4

= $2,816

b.

Total cost = Down payment + Interest + Principal

= $2,200 + $2,816 + $8,800

= $13,816

c.

Monthly payment = (Interest + Principal) / Number of months

= ($2,816 + $8,800) / (4 × 12)

= $242

d.

APR = (2 × n × I) / [P(N + 1)]

= (2 × 12 × $2,816) / [$8,800($48 + 1)]

= 0.1567, or $15.67% a.Total variable costs = [(Annual mileage / Miles per gallon) × Gas price per gallon] + Oil changes and repairs + Parking and tolls

= [(15,240 / 24) × $4.00] + $880 + $760

= $4,180

Total fixed cost = Depreciation + Loan interest + Insurance + License and registration fees

= $3,000 + $730 + $935 + $150

= $4,815

Total annual operating costs = Total variable costs + Fixed ownership costs

= $4,180 + $4,815

= $8,995

b. Operating cost per mile = Total annual operating costs / Annual mileage

= $8,995 / 15,240

= $0.590, or 59.0 cents per mile Monthly mortgage payment = Mortgage payment factor × (Mortgage amount / $1,000)

Monthly mortgage payment = $7.91 × ($140,500 / $1,000)

= $1,111.36

Monthly mortgage payment = $5.68 × ($215,500 / $1,000)

= $1,224.04

Monthly mortgage payment = $6.60 × ($166,000 / $1,000)

= $1,095.60