I can compute the maturity value and interest rate of a single payment loan.

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Presentation transcript:

I can compute the maturity value and interest rate of a single payment loan.

What is a single payment loan? Often called a promissory note. It is a written promise to pay a certain sum of money on a certain date in the future.

Important Vocabulary Maturity Value: the total amount you must repay. Term: amount of time for which the loan is granted. Ordinary Interest: based on 360-day year. Exact Interest: based on 365-day year.

Recall: I = P x R x T Ordinary Interest: I = P x R x (# of days ÷ 360) Exact Interest: I = P x R x (# of days ÷ 365)

Example 1 Single payment loan: $6425 Interest rate: 7% 180 days of ordinary interest Interest Owed = $6425 x.07 x (180 ÷ 360) = $ Maturity Value = Principal + Interest Owed =$ $ = $

Example 2 Single Payment loan: $4357 Interest Rate: 8.75% Exact Interest 250 days Interest Owed = $4357 x.0875 x (250 ÷ 365) = $ Maturity Value = $ $ = $

B18: p. 286 #5 – 16. Show your work.