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Financial Algebra © Cengage/South-Western Slide 1 4-2 LOANS Read monthly payments from a table. Compute monthly payments using a formula. Compute finance charges on loans. OBJECTIVES

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Financial Algebra © Cengage Learning/South-Western Slide 2 promissory note principal annual percentage rate cosigner life insurance prepayment privilege prepayment penalty wage assignment wage garnishment balloon payment lending institution collateral Key Terms

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Financial Algebra © Cengage Learning/South-Western Slide 3 Example 1 What is the monthly payment for a $4,000 two-year loan with an APR of 8.50%?

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Financial Algebra © Cengage Learning/South-Western Slide 4 Example 2 What is the total amount of the monthly payments for a $4,000, two-year loan with an APR of 8.50%?

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Financial Algebra © Cengage Learning/South-Western Slide 5 EXAMPLE 3 Find the finance charge for a $4,000, two-year loan with an 8.5% APR?

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Financial Algebra © Cengage Learning/South-Western Slide 6 Karl is borrowing x dollars over a three-year period. The monthly payment is y dollars. Express his finance charge algebraically. CHECK YOUR UNDERSTANDING

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Financial Algebra © Cengage Learning/South-Western Slide 7 Monthly Payment Formula M = monthly payment p = principal r = interest rate t = number of years

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Financial Algebra © Cengage Learning/South-Western Slide 8 EXAMPLE 4 Mark bought a new car. The total amount he needs to borrow is $28,716. He plans on taking out a 4-year loan at an APR of 5.12%. What is the monthly payment?

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Financial Algebra © Cengage Learning/South-Western Slide 9 Find the monthly payment for a $1,000, one-year loan at an APR of 7.5%. CHECK YOUR UNDERSTANDING

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