Simple Interest Installment Loans pp SECTION
Click to edit Master text styles Second level Third level Fourth level Fifth level 2 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 2 of simple interest installment loan (p. 290) A loan repaid with equal monthly payments. annual percentage rate (p. 290) An index showing the cost of borrowing money on a yearly basis, expressed as a percent. Key Words to Know
Click to edit Master text styles Second level Third level Fourth level Fifth level 3 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 3 of Monthly Payment = Amount of Loan ÷ $100 × Monthly Payments for a $100 Loan Formula 1
Click to edit Master text styles Second level Third level Fourth level Fifth level 4 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 4 of Total Amount Repaid = Number of Payments × Monthly Payments Formula 2
Click to edit Master text styles Second level Third level Fourth level Fifth level 5 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 5 of Finance Charge = Total Amount Repaid – Amount Financed Formula 3
Click to edit Master text styles Second level Third level Fourth level Fifth level 6 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 6 of Carol Ina obtained an installment loan of $1, to purchase some new furniture. The annual percentage rate is 8 percent. She must repay the loan in 18 months. What is the finance charge? Example 1
Click to edit Master text styles Second level Third level Fourth level Fifth level 7 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 7 of Find the monthly payment. Amount of Loan ÷ $100 × Monthly Payments for a $100 Loan $1, ÷ $ × $5.91 = $ Example 1 Answer: Step 1
Click to edit Master text styles Second level Third level Fourth level Fifth level 8 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 8 of Find the total amount repaid. Number of Payments × Monthly Payment 18 × $ = $1, Example 1 Answer: Step 2
Click to edit Master text styles Second level Third level Fourth level Fifth level 9 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 9 of Find the finance charge. Total Amount Repaid – Amount Financed $1, – $1, = $ Example 1 Answer: Step 3
Click to edit Master text styles Second level Third level Fourth level Fifth level 10 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 10 of Fulio and Julio Fernandez purchase a refrigerator with an installment loan that has an APR of 12 percent. The refrigerator sells for $1, The store financing requires a 10 percent down payment and 12 monthly payments. What is the finance charge? Example 2
Click to edit Master text styles Second level Third level Fourth level Fifth level 11 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 11 of Find the amount financed. Selling Price – Down Payment $1, – (0.10 × $1,399.99) $1, – $ = $1, Example 2 Answer: Step 1
Click to edit Master text styles Second level Third level Fourth level Fifth level 12 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 12 of Find the monthly payment. (Refer to the Monthly Payment on a Simple Interest Installment Loan of $100 on page 799 in your textbook). Amount of Loan ÷ $100 × Monthly Payment for a $100 Loan $1, ÷ $ × $8.88 = $ or $ Example 2 Answer: Step 2
Click to edit Master text styles Second level Third level Fourth level Fifth level 13 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 13 of Find the total amount repaid. Number of Payments × Monthly Payment 12 × $ = $1, Example 2 Answer: Step 3
Click to edit Master text styles Second level Third level Fourth level Fifth level 14 SECTION Copyright © Glencoe/McGraw-Hill MBA, Section 8-3, Slide 14 of Find the finance charge. Total Amount Repaid – Amount Financed $1, – $1, = $82.69 Example 2 Answer: Step 4
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