Kimberly Jensen and Rebecca Parker ofMankato, Minnesota, are

Kimberly Jensen and Rebecca Parker ofMankato, Minnesota, are both single. The pair share an apartment on thelimited resources provided through Kimberly’s disability check from SocialSecurity and Rebecca’s part-time job at a grocery store. The two grew tiredof their old furniture and went shopping. A local store offered credit at anAPR of 16 percent, with a maximum term of four years. The furniture they wishto purchase costs $2,800, with no down payment required. Using Table 7-1 orthe Garman/Forgue companion website, make the following calculations:a. What is the amount of theirmonthly payment if they borrow for four years?b. What are the total finance chargesover that four year period?c. How would the payment change if Kimberly and Rebecca reduced the loanterm to three years?d.What are the total finance charges over that three-year period?e. How would the payment change ifthey could afford a down payment of $500 with four years of financing?f. What are the total finance charges over that four-year period giventhe $500 down payment?h.What are the total finance charges over that three-year period given the $500down payment?Do the Math: Problem 5  Rule of 78s.Aaron Carson of Hays, Kansas, obtained atwo-year installment loan for $1,500 to buy some furniture eight months ago.The loan had a 12.6 percent APR and a finance charge of $204.72. His monthlypayment is $71.03. Aaron has made eight monthly payments and now wants to payoff the remainder of the loan. The lender will use the rule of 78s method tocalculate a prepayment penalty.a. How much will Aaron need to givethe lender to pay off the loan?b. What is the dollar amount of theprepayment penalty on this loan?

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