finance

Answer the following questions below.

Using Exhibit 3-1 (Sample Credit Scoring Table), determine the credit score for the following family units. After calculating the score, determine which of the types of credit (listed below), if any, you would feel comfortable adding to each family unit (based on the score). Finally based on the pricing strategy and competition for these products in your market, determine a cost of the chosen credit product(s) and determine you pricing (interest rate and terms) for each.

– Automobile Loan (new car)

– Bankcard (gold version)

– Bankcard (secured)

– Boat/RV Loan

– 1st mortgage

– Home equity line of credit

– Personal loan (unsecured)

Family Unit A

Family Unit A is 45 years old, single with two children (ages 6 and 10) living in a rental home. This individual has a full-time job after earning a Bachelor degree in Accounting and is earning $48,000 annually. The employer offers health insurance which the employee must contribute $50 per month. There is no life insurance provided by the employer, nor any time of retirement plan at this time. This individual has $15,000 in a checking account, and $20,000 in a savings account and $50,000 in a certificate of deposit. Payroll taxes represent $7,200 and normal annual expenses are $30,000.

Additional information:

2 recent credit inquiries

4 number of satisfactory ratings

0 number of 90 day ratings

0 number of past due balances

1 number of bankcards

$250-$1000 bankcard balances reported in the last 12 months

Family Unit

Family Unit B is a married couple in their early 50s, with three kids, one in college, one 17 years old and one 13 years old, both planning to attend college. The family lives in a house that will be paid off in three years ($5,000 left on the mortgage). One individual is a General Manager with an annual salary of $100,000, the other individual works part-time in retail, earning $18,000 annually. The General Manager has family coverage for health care, and has group life insurance coverage (on him/herself), along with a retirement plan. The couples financial assets are as follows: $50,000 in certificates of deposit, $25,000 in a checking account. $25,000 in a money market account, $400,000 in the retirement account (primarily divided 50/50 between growth mutual funds and the employers stock), $50,000 in a domestic bond fund, and $50,000 in an international stock fund. Payroll taxes represent $20,000 and normal annual expenses are $60,000.

Additional information:

2 recent credit inquiries

6 number of satisfactory ratings

0 number of 90 day ratings

0 number of past due balances

4 number of bankcards

$1000 – $3000 bankcard balances reported in the last 12 months

 

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