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**Thinking Mathematically**

Consumer Mathematics and Financial Management 8.5 Installment Buying

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**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.

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**The Vocabulary of Fixed Installment Loans**

The amount financed is what the consumer borrows: Amount financed = Cash price - Down payment

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**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

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**The Vocabulary of Fixed Installment Loans**

The finance charge is the interest on the installment loan: Finance charge = Total installment price - cash price

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**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%)

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**Example – Using an APR table**

Exercise Set 8.5 #5, 11 A 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?

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**Thinking Mathematically**

Consumer Mathematics and Financial Management 8.5 Installment Buying

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