Financial Algebra © Cengage/South-Western Slide 1 4-2 LOANS Read monthly payments from a table....
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Transcript of Financial Algebra © Cengage/South-Western Slide 1 4-2 LOANS Read monthly payments from a table....
Financial Algebra© Cengage/South-Western Slide 11
4-2
LOANS
Read monthly payments from a table.
Compute monthly payments using a formula.
Compute finance charges on loans.
OBJECTIVES
Financial Algebra© Cengage Learning/South-Western Slide 22
promissory note principal annual percentage rate cosigner life insurance prepayment privilege
prepayment penalty wage assignment wage garnishment balloon payment lending institution collateral
Key Terms
Financial Algebra© Cengage Learning/South-Western Slide 33
Example 1Example 1
What is the monthly payment for a $4,000 two-year loan with an APR of 8.50%?
Financial Algebra© Cengage Learning/South-Western Slide 44
Example 2Example 2
What is the total amount of the monthly payments for a $4,000, two-year loan with an APR of 8.50%?
Financial Algebra© Cengage Learning/South-Western Slide 55
EXAMPLE 3EXAMPLE 3
Find the finance charge for a $4,000, two-year loan with an 8.5% APR?
Financial Algebra© Cengage Learning/South-Western Slide 66
Karl is borrowing x dollars over a three-year period. The monthly payment is y dollars. Express his finance charge algebraically.
CHECK YOUR UNDERSTANDING
Financial Algebra© Cengage Learning/South-Western Slide 77
Monthly Payment FormulaMonthly Payment FormulaMonthly Payment FormulaMonthly Payment Formula
M = monthly paymentp = principalr = interest ratet = number of years
112
1
121
1212
12
t
t
r
rrp
M
Financial Algebra© Cengage Learning/South-Western Slide 88
EXAMPLE 4EXAMPLE 4
Mark bought a new car. The total amount he needs to borrow is $28,716. He plans on taking out a 4-year loan at an APR of 5.12%. What is the monthly payment?
Financial Algebra© Cengage Learning/South-Western Slide 99
Find the monthly payment for a $1,000, one-year loan at an APR of 7.5%.
CHECK YOUR UNDERSTANDING