Section 5-1

Monthly Payments

What do you know about Credit?

• Credit is whenever goods, cash, or services are provided in the promise to pay at a future date.

• Typical forms of credit: Credit Cards, Car loans, and mortgages.

How do people make money from credit?

• Finance Charge: An amount paid for using borrowed money.

• That is called interest• Deferred Payment Price: Total amount the

borrower must repay. (Principal + Interest)

What is credit good for?

• 1. Stabilizes the economy: Allows businesses to buy goods that they need but don’t have the money currently.

• 2. Promotes business growth• 3. Credit expands productivity and production:

College Loans promotes better education and higher pay. Businesses need money to get started before they can sell their product.

What is credit good for?

• Raises standard of living: Allows people to buy homes and cars without having to save up for the entire amount.

Parts of an Installment Loan

• 1. Down Payment: An amount required before the bank will give you a loan.

• 2. Substantial Finance Charge so the company can make money

• 3. Usually payments of equal amount spread out through the term of the loan.

• 4. Security agreement to the lender to make sure the payments are sent on time.

Finding monthly payments

1)1(

)1Pr(

t

t

r

rM

Finding the amount to borrow

t

t

rr

rMP

)1(

]1)1[(

Now lets take a open our books

• Please open your books we will read pg. 189 – 193

• Homework: EYS 1-14, 30-33, 37-40 pg. 194