Presentation on theme: "Loans- Chapter 8 Do Now- Jane Dimas obtained a single-payment loan of $420 to pay a repair bill that she did not have the cash for. She agreed to pay."— Presentation transcript:
1 Loans- Chapter 8Do Now- Jane Dimas obtained a single-payment loan of $420 to pay a repair bill that she did not have the cash for. She agreed to pay back the loan in 90 days at an interest rate of 12.75% exact interest. What is the maturity value of her loan?Exact interest is = 365 daysI = P x R x T$420 x x 90/365=$13.20 interest$420 principal borrowed + $13.20 interest owed=$ maturity value (amount she has to pay back!)
3 Loans- Chapter 8 I = P x R X T $72,000 x .12 x 91/360= $2,184 interest Do Now- Anita Sloane’s bank granted her a single-payment loan of $72,000 for 91 days at 12% ordinary interest. What is the maturity value of the loan?Ordinary interest = 360 daysI = P x R X T$72,000 x .12 x 91/360=$2,184 interest$72,000 principal + $2,184 interest=$74,184 maturity value (amount that must be paid back in 91 days)
5 Loans – Chapter 8Do Now- What is an installment loan? Can you give any examples?An installment loan is a loan that is paid back in equal installments over a set period of time. People will usually give a down payment up front in order to lower their monthly payments. Home loans, car loans and college loans are popular types of installment loans.
6 Notes: Installment and Simple Interest Loans Down Payment- The amount of $$$ you put down at the beginning of the loan to lower your monthly payments.Amount Financed- Price of item you are buying – down payment.Monthly Payment- The amount of the bill you will receive every month. It is fixed, meaning it will not change.Finance Charge- The total amount you repay on the loan – the amount financed.
7 Do NowTakesha Quintero is buying a new refrigerator for $1399. She makes a down payment of $199 and financed the rest. How much did she finance? Amount financed =Cash price – Down payment $ $199 = $1200 financed
8 Do NowRebecca Clay purchased a washer and dryer for $1140. She used the store’s installment credit plan to pay for the items. She made a 20% down payment and financed the rest. What amount did she finance? Cash price – down payment $1140 – (1140 x .20) $ $228 = $912 down payment
9 Do NowJulio Fernandez purchases a stove with an installment loan that has an APR of 12%. The stove sells for $ The store requires a 10% down payment and 12 monthly payments. What is the finance charge? Step 1: Find the amount financed $ – (.10 x $ ) $ $140 = $
10 Step 2: Find the monthly payment Refer to the chart on page 54 for this! (Amount of loan / $100) x monthly payment for a $100 loan ($ /$100) x $8.88 from chart= $ monthly payment Step 3: Find the total amount repaid 12 month of payments x $ monthly payment= $ Step 4: Find the finance charge $ x $ = $82.69 finance charge
12 Do Now Turn to workbook p.54, #3 (Do on separate sheet of paper) b)Look on the chart 12 months, 10% APRThe number you find is 8.798.79 x 120 = $ monthly paymentc) 12 monthly payments x $ =$12, total amount paid backd) Finance Charge = $12, $12,000= $ finance charge (the cost of borrowing the $$)
14 Loans- Ch. 8Do Now- Sam Garcia obtained a 12-month loan from her credit union for $1500 at a rate of 12%. Her monthly payment is $ For the first payment: a) What is the interest? $1500 x .12 x 1/12 = $15 interest b) How much is the payment to principal? $ $15 = $ c) What is the new balance? $ $ = $ new balance
15 Do NowJames Connor took a 24 month loan of $7,000 from his bank at a rate of 8.75%. His first monthly payment is $ For the first payment: a) What is the interest? $7000 x x 1/12 = $51.04 interest b) What is the payment to principal? =$ $51.04 = $ payment to principal c) What is the new balance? =$7,000 - $ = $ new balance
17 Do Now Turn to your notebook, page 55, #4 Patricia Nichols took out a $4,000 simple interest loan at 12 % for 12 months. After 5 payments, the balance was $ She pays the loan off when the next payment is due.What is the current month’s interest?$ x .12 x 1/12=$23.92 interestb) What is the final payment?$ $23.92=$ final payment
19 Do NowNatalie Rubino is planning to borrow $2,800 for a new furnace. Bell Finance will loan her the money for 24 months at a finance charge of $428. What is the APR on this loan? Please turn to page 56 in WB $100 x (finance charge / amount financed) $100 x ($428 / $2800)= $100 x = $15.29 Chart- Go down to 24 months, trace across to # closest to $15.29 and locate the APR on top! APR is 14%
21 Please turn to page 56, #3 in your notebooks Do NowPlease turn to page 56, #3 in your notebooks$ $574.54= $2,000 amount financed$121 monthly payment x 18 months=$2,178 total payments - $2000 financed=$178 finance charge$100 x ($178 / $2000)=8.9 look on chart 18 months, $8.90= 11% APR