Presentation on theme: "Thinking Mathematically"— Presentation transcript:
1 Thinking Mathematically Consumer Mathematics and Financial Management8.5 Installment Buying
2 The Vocabulary of Fixed Installment Loans Installment loan – a loan that you pay off with weekly or monthly payments.Fixed installment loan – fixed periodic payment.
3 The Vocabulary of Fixed Installment Loans The amount financed is what the consumer borrows:Amount financed = Cash price - Down payment
4 The Vocabulary of Fixed Installment Loans The total installment price is the sum of all monthly payments plus the down payment:Total installment price =Total of monthly payments + Down payment
5 The Vocabulary of Fixed Installment Loans The finance charge is the interest on the installment loan:Finance charge =Total installment price - cash price
6 Steps in Using an APR Table Compute the finance charge per $100 financed: [Finance charge / (Amount financed/ $100)Look in the row corresponding to the number of payments to be made, and find the entry closest to the value in step 1.Find the APR a the top of the column in which the entry from step 2 is found. (This is the APR rounded to the nearest ½%)
7 Example – Using an APR table Exercise Set 8.5 #5, 11A computer is paid for with 12 monthly installments. The finance charge per $100 is $ What is the APR for this loan?Furniture is purchased for a cash price of $17,500. The purchase is financed by paying $500 down, and $ per month for 60 months.Determine the amount financed.Determine the total installment price.Determine the finance charge.What is the APR for this loan?
8 Thinking Mathematically Consumer Mathematics and Financial Management8.5 Installment Buying