Aim for FiveBusiness with Personal Finance

Question 2: Personal Finance

Priya and Sam: credit card interest and a home goal

  • Unit 3
  • 3 points
  • About 13 minutes

You can use a calculator on this question, just like on exam day.

A short scenario about a person's or household's money, with numbers and goals: you read the data (for example, total assets versus total liabilities), describe a challenge or opportunity, and explain an action that would help them reach a goal. On the exam: Question 2 of 4, Section IIB (Questions 2–4 share 65 minutes); suggested time 12–13 minutes, 5% of the score. Assesses Skill Categories 1 and 3. Section II has 4 free-response questions in 90 minutes (40% of the score). The exam is fully digital in Bluebook, and only a 4-function calculator is allowed (handheld or the built-in Desmos 4-function calculator).

The question and its sources

Respond to parts A, B, and C. The Torres household has come to you, a financial advisor, for guidance.

The Torres household

Priya and Sam Torres share their finances. Their combined take-home pay is $6,400 a month, and their regular monthly expenses are $5,700.

They have $9,000 in a checking account that pays no interest. They have no other savings.

They owe $4,800 on a credit card with an annual percentage rate (APR) of 22.8%. Each month they pay only the $150 minimum payment, which is included in their expenses. Assume the card charges interest each month at one-twelfth of the APR.

Their goals: save $20,000 for a down payment on a home within three years, and stop paying so much in interest.

Source: Hypothetical person and figures written for this practice question

Suggested time: 13 minutes

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Part (A)

1 point

Using data from the scenario, calculate the interest the Torres household is charged on the credit card balance for one month. Show your work.

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Part (B)

1 point

Describe one financial challenge or opportunity in the scenario that is affecting the Torres household's ability to achieve its financial goals right now.

0 / 2,500 characters

Part (C)

1 point

Explain how one specific step the Torres household could take would help it achieve one of its financial goals.

0 / 2,500 characters

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