1. Aim: Money Matters: Amortization Course: Math Literacy Aim: How does money matter? Annuities in reverse: Amortization! Do Now:

2. Aim: Money Matters: Amortization Course: Math Literacy Amortization – The Payback! Amortization – the process of paying off a debt by systematically making partial payments until the principal and interest are repaid. If the loan is paid off in regular, equal installments, we solve the Present Value of an Annuity Formula for m. Present Value of an Annuity Formula Amortization Formula

3. Aim: Money Matters: Amortization Course: Math Literacy Fixed Installment Loans You decide to purchase a pick-up truck that costs $9,345. You finance the truck by paying $300 at the time of purchase, called the down payment, and $194.38 per month for 60 months. Fixed installment loan – scheduled pay back with a fixed amount each period. amount financed: price – down payment total installment price: total monthly payment + down payment finance charge: total installment price – cash price Often there are other costs involved!

4. Aim: Money Matters: Amortization Course: Math Literacy Model Problem Best Buy is offering an annual interest rate of 9.5% for 4 years on the purchase of a 50” LCD TV that costs $5995. Find the monthly payment with no money down. Amortization Formula r = 0.095 P = 5995 t = 4 n = 12 $150.61 is the monthly payment.

5. Aim: Money Matters: Amortization Course: Math Literacy Model Problem You buy a car for $18,395. a)If the sales tax is 6.5% of the purchase price, find the amount of the sales tax. b)If the car license fee is 1.2% of the purchase price, find the amount of the fee. c)If you make a $2500 down payment, find the amount of the loan needed. d)Assuming you get the loan at a rate of 7.5% for 4 years, determine the monthly car payment.

6. Aim: Money Matters: Amortization Course: Math Literacy Model Problem You buy a car for $18,395. a)If the sales tax is 6.5% of the purchase price, find the amount of the sales tax. sales tax is $1195.68 b) If the car license fee is 1.2% of the purchase price, find the amount of the fee. license fee is $220.74

7. Aim: Money Matters: Amortization Course: Math Literacy Model Problem You buy a car for $18,395. c) If you make a $2500 down payment, find the amount of the loan needed. Loan amount = purchase price + sales tax + license fee – down payment. Loan amount = 18,395 + 1195.68 + 220.74 – 2500 = 17,311.42

8. Aim: Money Matters: Amortization Course: Math Literacy Model Problem You buy a car for $18,395. d) Assuming you get the loan at a rate of 7.5% for 4 years, determine the monthly car payment. Amortization Formula r = 0.075 P = 17,311.42 t = 4 n = 12 $418.37 is the monthly payment.

9. Aim: Money Matters: Amortization Course: Math Literacy APR Table 1.if you know the total interest you’re paying you can find the APR 2.If you know the APR you can find the cost in interest # months Annual Percentage Rate (APR) 10.0%10.5%11.0%11.5%12.0%12.5% Finance charge per $100 of amount financed 62.943.083.233.383.533.68 125.505.786.066.346.626.90 188.108.528.939.359.7710.19 2410.7511.3011.8612.4212.9813.54 3013.4314.1314.8315.5416.2416.95

10. Aim: Money Matters: Amortization Course: Math Literacy Model Problem You paid a finance charge of $1299.90 on a loan of $9045 paid over 30 months. What is APR? # months Annual Percentage Rate (APR) 10.0%10.5%11.0%11.5%12.0%12.5% Finance charge per $100 of amount financed 62.943.083.233.383.533.68 125.505.786.066.346.626.90 188.108.528.939.359.7710.19 2410.7511.3011.8612.4212.9813.54 3013.4314.1314.8315.5416.2416.95

11. Aim: Money Matters: Amortization Course: Math Literacy Model Problem What will be the finance charge for a $3000 loan for 24 months at an APR of 11.5%? # months Annual Percentage Rate (APR) 10.0%10.5%11.0%11.5%12.0%12.5% Finance charge per $100 of amount financed 62.943.083.233.383.533.68 125.505.786.066.346.626.90 188.108.528.939.359.7710.19 2410.7511.3011.8612.4212.9813.54 3013.4314.1314.8315.5416.2416.95