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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 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 days
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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 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 days I = P x R x T $420 x .1275 x 90/365 =$13.20 interest $420 principal borrowed + $13.20 interest owed =$433.20 maturity value (amount she has to pay back!)
Loans- Chapter 8 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 days I = 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)
Loans – Chapter 8 Do 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.
Notes: Installment and Simple Interest Loans Down Payment- The amount of $$$ you put down at the beginning of the loan to lower your monthly payments. Amount Financed- Price of item you are buying – down payment. Monthly Payment- The amount of the bill you will receive every month. It is fixed, meaning it will not change. Finance Charge- The total amount you repay on the loan – the amount financed.
Do Now Takesha Quintero is buying a new refrigerator for $1399. She makes a down payment of $199 and financed the rest. How much did she finance? Amount financed =Cash price – Down payment $1399 - $199 = $1200 financed
Do Now Rebecca Clay purchased a washer and dryer for $1140. She used the store’s installment credit plan to pay for the items. She made a 20% down payment and financed the rest. What amount did she finance? Cash price – down payment $1140 – (1140 x .20) $1140 - $228 = $912 down payment
Do Now Julio Fernandez purchases a stove with an installment loan that has an APR of 12%. The stove sells for $1399.99. The store requires a 10% down payment and 12 monthly payments. What is the finance charge? Step 1: Find the amount financed $1399.99 – (.10 x $1399.99) $1399.99 - $140 = $1259.99
Step 2: Find the monthly payment Refer to the chart on page 54 for this! (Amount of loan / $100) x monthly payment for a $100 loan ($1259.99/$100) x $8.88 from chart= $111.89 monthly payment Step 3: Find the total amount repaid 12 month of payments x $111.89 monthly payment= $1342.68 Step 4: Find the finance charge $1342.68 x $1259.99= $82.69 finance charge
Assignment: Workbook Page 54, #1-3
Do Now Turn to workbook p.54, #3 (Do on separate sheet of paper) a)$12,000 / $100 =120 b)Look on the chart 12 months, 10% APR The number you find is 8.79 8.79 x 120 = $1054.80 monthly payment c) 12 monthly payments x $1054.80= $12,657.60 total amount paid back d) Finance Charge = $12,657.60 - $12,000 = $657.60 finance charge (the cost of borrowing the $$)
Assignment: Workbook p.54, # 4 & 5
Loans- Ch. 8 Do Now- Sam Garcia obtained a 12-month loan from her credit union for $1500 at a rate of 12%. Her monthly payment is $133.20. 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? $133.20 - $15 = $118.20 c) What is the new balance? $1500 - $118.20 = $1381.80 new balance
Do Now James Connor took a 24 month loan of $7,000 from his bank at a rate of 8.75%. His first monthly payment is $211.56. For the first payment: a) What is the interest? $7000 x .0875 x 1/12 = $51.04 interest b) What is the payment to principal? =$211.56 - $51.04 = $160.52 payment to principal c) What is the new balance? =$7,000 - $160.52 = $6839.48 new balance
Assignment: Workbook Page 55, #1-3
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 $2392.16. She pays the loan off when the next payment is due. • What is the current month’s interest? $2392.16 x .12 x 1/12= $23.92 interest b) What is the final payment? $2392.16 + $23.92= $2415.92 final payment
Assignment: Workbook, Page 55 # 4 & 5
Do Now Natalie 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)= .15285 $100 x .15285 = $15.29 Chart- Go down to 24 months, trace across to # closest to $15.29 and locate the APR on top! APR is 14%
Assignment Workbook, Page 56, #1-3
Do Now Please turn to page 56, #3 in your notebooks • $2574.54 - $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
Assignment Workbook, Page 56, #4 & 5
