Gcmii Final Examination Student Name Da ✓ Solved

Gcmii Final Examinationstudent Name Da

Find the average daily balance, interest, balance due, minimum payments, and loan payments based on credit card transactions. Calculate total mortgage costs for different options, determine the necessary annual income for mortgage affordability, and compute savings for closing costs. Analyze statistical data on teenage drug use and regression lines. Solve extra credit questions involving investments, deposits, license plates, and group combinations.

Sample Paper For Above instruction

Part I: Personal Finance - Credit Cards

To address the problem of calculating the average daily balance for a billing period with multiple transactions, it is essential to understand the method involved. The average daily balance is computed by summing the daily balances over the billing period and dividing by the number of days. Given the transactions and previous balance, we carefully track balances each day, taking into account payments and charges, and thus derive the average.

Starting with a previous balance of $3,800 on September 1, the billing period ending on September 30 involves various transactions. The payment on September 5 reduces the balance to $3,000, then charges to gas, clothing, and airline tickets increase the balance sequentially. Calculating the number of days each balance persists enables the subsequent calculation of the weighted average, which, when divided by the total days (30), provides the average daily balance.

Interest is computed using the average daily balance multiplied by the monthly interest rate of 2%. The interest for the billing period is the interest accrued on the average daily balance, which is then used to find the interest due on the next billing date.

The balance due on October 1 is derived from the balance at the end of the billing period, including any accrued interest. Additionally, minimum monthly payments are determined based on the specified rules: if the balance is less than $360, a $10 minimum payment; otherwise, 1/36 of the balance, rounded up.

Calculating the portion of the minimum payment that goes toward interest versus the principal involves applying the interest rate to the current balance and subtracting that interest from the minimum payment, thus identifying the reduction in principal each month.

If one elects to pay off the balance over four years without further charges, the total balance divided by the number of months yields the monthly payment, considering the interest rate for amortization.

Part II: Personal Finance - Mortgages

The mortgage analysis starts with the home price of $120,000 and a 15% down payment. Two options are compared: a 30-year fixed mortgage at 7% with closing costs and points, versus a 6.5% loan with different closing costs and points. Calculating the total cost involves summing the down payment, closing costs, points (which are interest payments paid upfront), and the total interest paid over the loan’s life.

The total costs of each mortgage are then compared to identify which option is more cost-effective. The difference in total costs indicates the financial advantage of one plan over the other.

Subsequently, the required gross income to qualify for the mortgage is estimated based on the industry rule of setting maximum monthly payments at 28% of gross income. This calculation involves the monthly mortgage payment, derived from amortization formulas, and solving for annual income.

Finally, to determine the upfront deposit needed into an interest-bearing account (4% annual, quarterly compounding) for the closing costs to be available in five years, the present value formula is applied, solving for the initial amount required to grow to the specified amount.

Part III: Statistics

The statistical analysis involves creating scatter plots, evaluating correlation, calculating the correlation coefficient, and deriving regression line equations. The data provided on teenage drug use across countries serves as the basis for these analyses.

For the scatter plot, data points of each country’s marijuana and other illegal drug percentages are plotted. The correlation between the variables indicates whether a positive, negative, or no relationship exists.

The correlation coefficient, calculated by applying the Pearson formula, quantifies the strength and direction of the linear relationship between two variables — literacy rates and undernourishment. The computed regression line describes the relationship between marijuana use (independent variable) and other drug use (dependent variable).

Using the regression equation allows predicting the percentage of teenagers using illegal drugs other than marijuana when the marijuana use rate is 10%, rounding to the nearest percent for the final estimate.

Part IV: Extra Credit

The extra credit questions involve compound interest calculations on different investments, the present value for future savings, total possible license plates, and combinations of group selections.

Calculating the difference in investment earnings requires applying compound interest formulas with specific rates, time periods, and compounding frequencies. The savings needed to reach a specific future value involve solving for present value with given interest rates and periods.

The number of license plates derives from permutations of characters in specified formats, while the number of ways to select group members applies combinations formulas mathematics (nCr).

References

  • Brigham, E.F., & Ehrhardt, M.C. (2013). Financial Management: Theory & Practice. Cengage Learning.
  • Higgins, R.C. (2012). Money, Banking, and the Economy. McGraw-Hill Education.
  • Levine, R. (2013). Principles of Economics. Pearson.
  • Ross, S., Westerfield, R., & Jaffe, J. (2013). Corporate Finance. McGraw-Hill Education.
  • Fisher, P. (2014). Statistics for Business & Economics. Pearson.
  • Newman, D. (2014). Introduction to Statistics. Cengage Learning.
  • Khan Academy. (n.d.). Personal Finance and Statistics resources. Khan Academy. https://www.khanacademy.org
  • Investopedia. (n.d.). Mortgage Calculations. https://www.investopedia.com
  • Federal Reserve. (2020). Consumer Credit and Debt. https://www.federalreserve.gov
  • Office of Financial Education. (2018). Credit Reports and Scores. U.S. Department of the Treasury.

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