L2 Practice Part 2
Completion requirements
Unit F: Finance
Practice
Instructions: Click the Download File button to download a printable PDF of the questions. Answer each of the following practice questions on a separate piece of paper. Step by step solutions are provided under the Solutions tab.
You will learn the material more thoroughly if you complete the questions before checking the answers.
- Miguel has a five-year-old truck with 125 000 km. He drives about 25 000 km/year. His truck has a fuel consumption of 12.1 L/100 km. He records his estimated costs for the next year in a table.
Cost Estimated Yearly Cost
Including Taxoil change $130.00 rotate tires $50.00 replace air filter $60.00 registration $50.00 repair front brakes $400.00 insurance $800.00 replace timing belt $1 100.00 parking $80.00 fuel
- Calculate the cost of fuel if the price of gas is $1.19/L.
- Calculate the total fixed costs.
- Calculate the total variable costs.
- Calculate the total cost of operating the vehicle for a year.
- How much money should Miguel set aside per month to pay for his vehicle expenses?
- Heather is trying to decide if she should buy a new car, buy a used car, or lease a new car. She recorded the estimated monthly expenses in a table. The loans and the lease are for a 36 month term.
Cost New Car Used Car Lease monthly payment $542.36 $213.54 $292.17 oil change $10.00 $10.00 $10.00 maintenance and repairs $0.00 $150.00 $0.00 fuel $60.00 $90.00 $60.00 registration $5.00 $5.00 $5.00 insurance $150.00 $62.50 $150.00 total $767.36 $531.04 $517.17
- Calculate the monthly fixed costs of purchasing a new car.
- Calculate the monthly variable costs of purchasing a used car.
- Why does the used car, but not the new car, have maintenance costs?
- What costs remain the same regardless of which vehicle Heather gets?
- Calculate the total cost for the new car for the 36 month term.
- Calculate the total cost for the used car for the 36 month term.
- Calculate the total cost for the leased car for the 36 month term.
- Which of the three options is the most economical for 36 months?
- Which of the three options is the best value?
- How do the fixed costs change after 36 months?
- Gabriel is considering two different options. He has set aside $900.00 per month for car expenses.
Option 1: Buying a car for $15 486.00 with payments for 4 years at an annual interest rate of 6.9%. The estimated expenses for Option 1 are recorded in the table.
Cost Option 1 monthly payment oil change $15.00 fuel $100.00 registration $7.00 insurance $125.00 total
- Use the Monthly Payment Calculator to find the monthly payment for Option 1. Once the monthly payment is calculated, record it in the table. Calculate the total monthly cost for Option 1.
- Use the Monthly Payment Calculator to calculate the monthly payment for Option 2.
Option 2: Buying a new car for $25 830.00 with payments for 6 years at an annual interest rate of 5.9%.
The estimated expenses for Option 2 are recorded in the table.
Cost Option 2 monthly payment oil change $15.00 fuel $130.00 registration $7.00 insurance $175.00 total - What will be the monthly expenses for Option 1 in 4 years?
- What will be the monthly expenses for Option 2 in 4 years?
- Would Option 1 or Option 2 be the best choice for Gabriel?
- Use the Monthly Payment Calculator to find the monthly payment for Option 1. Once the monthly payment is calculated, record it in the table. Calculate the total monthly cost for Option 1.
Miguel has a five-year-old truck with 125 000 km. He drives about 25 000 km/year. His truck has a fuel consumption of 12.1 L/100 km. He records his estimated costs for the next year in a table.
| Cost | Estimated Yearly Cost Including Tax |
|---|---|
| oil change |
$130.00 |
| rotate tires |
$50.00 |
| replace air filter |
$60.00 |
| registration | $50.00 |
| repair front brakes |
$400.00 |
| insurance | $800.00 |
| replace timing belt |
$1 100.00 |
| parking | $80.00 |
| fuel |
- Calculate the cost of fuel if the price of gas is $1.19/L.
- Calculate the total fixed costs.
- Calculate the total variable costs.
- Calculate the total cost of operating the vehicle for a year.
- How much money should Miguel set aside per month to pay for his vehicle expenses?
-
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The cost of the fuel is $3 599.75.
- The fixed costs include the insurance and registration. Add these values to find the total fixed costs.
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The fixed costs are $850.00. - The variable costs include the oil changes, rotating tires, replacing air filters, replacing the front brakes, replacing the timing belt, parking, and fuel. Add these values to find the total variable costs.
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The variable costs are $6 219.75. -
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The total cost is $7 069.75. - To find the monthly cost, divide the yearly cost by 12.
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Miguel should allot $589.15 each month to pay for car expenses.
Heather is trying to decide if she should buy a new car, buy a used car, or lease a new car. She recorded the estimated monthly expenses in a table. The loans and the lease are for a 36 month term.
| Cost | New Car |
Used Car |
Lease |
|---|---|---|---|
| monthly payment |
$542.36 | $213.54 | $292.17 |
| oil change |
$10.00 | $10.00 | $10.00 |
| maintenance and repairs |
$0.00 | $150.00 | $0.00 |
| fuel | $60.00 | $90.00 | $60.00 |
| registration | $5.00 | $5.00 | $5.00 |
| insurance | $150.00 | $62.50 | $150.00 |
| total | $767.36 | $531.04 | $517.17 |
- Calculate the monthly fixed costs of purchasing a new car.
- Calculate the monthly variable costs of purchasing a used car.
- Why does the used car, but not the new car, have maintenance costs?
- What costs remain the same regardless of which vehicle Heather gets?
- Calculate the total cost for the new car for the 36 month term.
- Calculate the total cost for the used car for the 36 month term.
- Calculate the total cost for the leased car for the 36 month term.
- Which of the three options is the most economical for 36 months?
- Which of the three options is the best value?
- How do the fixed costs change after 36 months?
- The fixed costs include the monthly payment, insurance, and registration. Add these values to find the total fixed costs.
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The fixed costs are $697.36. - The variable costs include the oil changes, maintenance and repairs, fuel, and insurance. Add these values to find the total variable costs.
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The variable costs are $250.00. - Most new cars have warranties that cover non-routine maintenance and repairs for the first 36 months or 100 000 km. Used cars usually do not have warranties.
- The cost for the oil changes and the registration are the same for all three vehicles.
-
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-
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-
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- The best option is the lease.
- Buying the used car is slightly more expensive than the lease, however, at the end of the 36 month term, the used car would belong to Heather. After 36 months, the leased vehicle will be returned to the dealership. Buying the used
car is a better deal than leasing.
- After 36 months, the loan is paid off on the new and used vehicles. The total monthly cost for the new car would be $225.00 and the total monthly cost for the used car would be $317.50. The fixed costs of the lease do not change.
Gabriel is considering two different options. He has set aside $900.00 per month for car expenses.
Option 1: Buying a car for $15 486.00 with payments for 4 years at an annual interest rate of 6.9%. The estimated expenses for Option 1 are recorded in the table.
Option 1: Buying a car for $15 486.00 with payments for 4 years at an annual interest rate of 6.9%. The estimated expenses for Option 1 are recorded in the table.
| Cost | Option 1 |
|---|---|
| monthly payment |
|
| oil change |
$15.00 |
| fuel | $100.00 |
| registration | $7.00 |
| insurance | $125.00 |
| total |
- Use the Monthly Payment Calculator to find the monthly payment for Option 1. Once the monthly payment is calculated, record it in the table. Calculate the total monthly cost for Option 1.
- Use the Monthly Payment Calculator to calculate the monthly payment for Option 2.
Option 2: Buying a new car for $25 830.00 with payments for 6 years at an annual interest rate of 5.9%.
The estimated expenses for Option 2 are recorded in the table.
Cost Option 2 monthly payment oil change $15.00 fuel $130.00 registration $7.00 insurance $175.00 total - What will be the monthly expenses for Option 1 in 4 years?
- What will be the monthly expenses for Option 2 in 4 years?
- Would Option 1 or Option 2 be the best choice for Gabriel?
- To use the Monthly Payment Calculator, the principal, annual interest rate, and number of monthly payments must be known.
principal 15 486.00 annual interest rate 6.9 number of monthly payments «math xmlns=¨http://www.w3.org/1998/Math/MathML¨»«mn»4«/mn»«mo»§#160;«/mo»«mi»years«/mi»«mo»§#215;«/mo»«mfrac»«mrow»«mn»12«/mn»«mo»§#160;«/mo»«mi»months«/mi»«/mrow»«mrow»«mn»1«/mn»«mo»§#160;«/mo»«mi»year«/mi»«/mrow»«/mfrac»«mo»=«/mo»«mn»48«/mn»«mo»§#160;«/mo»«mi»months«/mi»«/math»
Substitute the values from the chart into the Monthly Payment Calculator and then click
to find the monthly payment.
Cost Option 1 monthly payment «math xmlns=¨http://www.w3.org/1998/Math/MathML¨»«mo mathcolor=¨#FF0000¨»$«/mo»«mn mathcolor=¨#FF0000¨»370«/mn»«mo mathcolor=¨#FF0000¨».«/mo»«mn mathcolor=¨#FF0000¨»11«/mn»«/math» oil change $15.00 fuel $100.00 registration $7.00 insurance $125.00 total «math xmlns=¨http://www.w3.org/1998/Math/MathML¨»«mo mathcolor=¨#FF0000¨»$«/mo»«mn mathcolor=¨#FF0000¨»617«/mn»«mo mathcolor=¨#FF0000¨».«/mo»«mn mathcolor=¨#FF0000¨»11«/mn»«/math»
The monthly payment is $370.11. The total monthly cost of Option 1 is $617.11. - To use the Monthly Payment Calculator, the principal, annual interest rate, and number of monthly payments must be known.
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Substitute the values from the chart into the Monthly Payment Calculator and then click to find the monthly payment.
Cost Option 2 monthly payment «math xmlns=¨http://www.w3.org/1998/Math/MathML¨»«mo mathcolor=¨#FF0000¨»$«/mo»«mn mathcolor=¨#FF0000¨»426«/mn»«mo mathcolor=¨#FF0000¨».«/mo»«mn mathcolor=¨#FF0000¨»86«/mn»«/math» oil change $15.00 fuel $130.00 registration $7.00 insurance $175.00 total «math xmlns=¨http://www.w3.org/1998/Math/MathML¨»«mo mathcolor=¨#FF0000¨»$«/mo»«mn mathcolor=¨#FF0000¨»753«/mn»«mo mathcolor=¨#FF0000¨».«/mo»«mn mathcolor=¨#FF0000¨»86«/mn»«/math»
The monthly payment is $426.86. The total monthly cost of Option 2 is $753.86. - The monthly expenses will not include the monthly payment since the loan will be paid off.
Cost Option 1 monthly payment «math xmlns=¨http://www.w3.org/1998/Math/MathML¨»«mo mathcolor=¨#FF0000¨»$«/mo»«mn mathcolor=¨#FF0000¨»0«/mn»«mo mathcolor=¨#FF0000¨».«/mo»«mn mathcolor=¨#FF0000¨»00«/mn»«/math» oil change $15.00 fuel $100.00 registration $7.00 insurance $125.00 total «math xmlns=¨http://www.w3.org/1998/Math/MathML¨»«mo mathcolor=¨#FF0000¨»$«/mo»«mn mathcolor=¨#FF0000¨»247«/mn»«mo mathcolor=¨#FF0000¨».«/mo»«mn mathcolor=¨#FF0000¨»00«/mn»«/math»
The monthly expenses will be $247.00. - Since payments are for 6 years, there are still 2 years left of the monthly payment in this option.
Cost Option 2 monthly payment «math xmlns=¨http://www.w3.org/1998/Math/MathML¨»«mo mathcolor=¨#FF0000¨»$«/mo»«mn mathcolor=¨#FF0000¨»426«/mn»«mo mathcolor=¨#FF0000¨».«/mo»«mn mathcolor=¨#FF0000¨»86«/mn»«/math» oil change $15.00 fuel $130.00 registration $7.00 insurance $175.00 total «math xmlns=¨http://www.w3.org/1998/Math/MathML¨»«mo mathcolor=¨#FF0000¨»$«/mo»«mn mathcolor=¨#FF0000¨»753«/mn»«mo mathcolor=¨#FF0000¨».«/mo»«mn mathcolor=¨#FF0000¨»86«/mn»«/math»
The monthly expenses will still be $753.86. - Gabriel can afford both cars, however, the payments, fuel, and insurance costs are less for Option 1 than for Option 2. Gabriel will own the Option 1 car after 4 years whereas it would take 6 years to pay off the loan for Option 2.