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Single-Payment Loans

SECTION. 8-1. pp. 284-286. Single-Payment Loans. Compute: maturity value of a single-payment loan interest rate of a single-payment loan. Section Objective. Key Words to Know. single-payment loan (p. 284) A loan that has to be repaid with one payment after a specified period of time.

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Single-Payment Loans

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  1. SECTION 8-1 pp. 284-286 Single-Payment Loans

  2. Compute: • maturity value of a single-payment loan • interest rate of a single-payment loan Section Objective

  3. Key Words to Know single-payment loan (p. 284) A loan that has to be repaid with one payment after a specified period of time. promissory note (p. 284) A written promise to pay a certain sum of money on a certain date in the future.

  4. Key Words to Know maturity value (p. 284) The total amount that must be repaid on a loan, including the principal borrowed and the interest owed. term (p. 284) The amount of time for which a loan is granted before it has to be repaid.

  5. Key Words to Know ordinary interest (p. 284) Interest on a loan calculated by basing the time of the loan on a 360-day year. exact interest (p. 284) Interest on a loan calculated by basing the time of the loan on a 365-day year.

  6. Formula 1 Interest = Principal × Rate × Time

  7. Formula 2 Ordinary Interest = Principal × Rate × Time ÷ 360 Exact Interest = Principal × Rate × Time ÷ 365

  8. Formula 3 Maturity Value = Principal + Interest Owed

  9. A Picture Perfect Loan p. 284 How might a loan from Chen’s dad be different than a loan from a bank?

  10. Example 1 Anita Sloane’s bank granted her a single-payment loan of $72,000 for 91 days at 12 percent ordinary interest. What is the maturity value of the loan?

  11. Example 1 Answer: Step 1 Find the ordinary interest owed. Principal × Rate × Time $7,200.00 × 12% × 91/360 = $218.40

  12. Example 1 Answer: Step 2 Find the maturity value. Principal + Interest Owed $7,200.00 + $218.40 = $7,418.40

  13. Example 2 Anita Sloane’s bank granted her a single-payment loan of $72,000 for 91 days at 12 percent exact interest. What is the maturity value of the loan?

  14. Example 2 Answer: Step 1 Find the exact interest owed. Principal × Rate × Time $7,200 × 12% × 91/365 = $215.408 or $215.41

  15. Example 2 Answer: Step 2 Find the maturity value. Principal + Interest Owed $7,200.00 + $215.41 = $7,415.41

  16. Practice 1 Single payment loan of $2,750. Interest rate of 11 percent. Exact day of interest: 50. What is the interest owed?

  17. Practice 1 Answer $41.44

  18. Practice 2 Emily Andrews borrowed $16,382. Her bank granted her a single-payment loan for 286 days at 11.5 percent ordinary interest. What is the interest owed? What is the maturity value of her loan?

  19. Practice 2 Answer Interest owed: $1,496.68 Maturity value of loan: $17,878.68

  20. END OF SECTION 8-1 Single-Payment Loans

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