Shirley, a recent college​ graduate, excitedly described to her older sister the ​$1880 ​sofa, table, and chairs she found today.​ However, when asked she could not tell her sister which interest calculation method was to be used on her​ credit-based purchase. Calculate the monthly payments and total cost for a bank loan assuming a​ one-year repayment period and 13percent interest. Now assume the store uses the​ add-on method of interest calculation. Calculate the monthly payment and total cost with a​ one-year repayment period and 11percent interest. Explain why the bank payment and total cost are lower even though the stated interest rate is higher. The monthly payment for a bank loan assuming​ one-year repayment period and 13 percent interest is ​$______ .

 

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Perry, who is 50 years old, was building a new home for his family. However, he was running out of money and could not afford the pool they fell in love with. Since his family was upset, he decided to take a withdrawal from his annuity. He had contributed $100,000 to the annuity, and the value of the annuity today is $300,000. He decided to take a withdrawal of $60,000 from the annuity. Which of the following is correct?

• $40,000 is taxable as ordinary income.
• $40,000 is taxable as ordinary income and subject to the early withdrawal penalty.
• $60,000 is taxable as ordinary income.
• $60,000 is taxable as ordinary income and subject to the early withdrawal penalty.

 

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