Simple Interest Installment Loans
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Transcript of Simple Interest Installment Loans
Simple Interest Installment Loans
pp. 290-2938-3SECTIONSECTION
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Section ObjectiveSection ObjectiveFigure out:
• monthly payment on an installment loan
• total amount repaid on an installment loan
• finance charge on an installment loan
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simple interest installment loan (p. 290)
A loan repaid with equal monthly payments.
annual percentage rate (p. 290)
An index showing the cost of borrowing money on a yearly basis, expressed as a percent.
Key Words to KnowKey Words to Know
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Monthly Payment =
Amount of Loan ÷ $100 × Monthly Payments for a $100 Loan
Formula 1Formula 1
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Total Amount Repaid =
Number of Payments × Monthly Payments
Formula 2Formula 2
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Finance Charge = Total Amount Repaid – Amount Financed
Formula 3Formula 3
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A Picture Perfect Loan p. 290A Picture Perfect Loan p. 290
What do you think a bank looks for in a client who wants to take out a personal loan?
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Carla Hunt obtained an installment loan of $1,800.00 to purchase some new furniture. The annual percentage rate is 8 percent. She must repay the loan in 18 months.
What is the finance charge?
Example 1Example 1
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Find the monthly payment.
Amount of Loan ÷ $100 × Monthly Payments for a $100 Loan
$1,800.00 ÷ $100.00 × $5.91 = $106.38
Example 1 Answer: Example 1 Answer: Step 1Step 1
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Find the total amount repaid.
Number of Payments × Monthly Payment
18 × $106.38 = $1,914.84
Example 1 Answer: Example 1 Answer: Step 2Step 2
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Find the finance charge.
Total Amount Repaid – Amount Financed
$1,914.84 – $1,800.00 = $114.84
Example 1 Answer: Example 1 Answer: Step 3Step 3
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Tulio and Lupe Fernandez purchase a refrigerator with an installment loan that has an APR of 12 percent. The refrigerator sells for $1,399.99. The store financing requires a 10 percent down payment and 12 monthly payments.
What is the finance charge?
Example 2Example 2
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Find the amount financed.
Selling Price – Down Payment
$1,399.99 – (0.10 × $1,399.99)
$1,399.99 – $140.00 = $1,259.99
Example 2 Answer: Example 2 Answer: Step 1Step 1
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Find the monthly payment. (Refer to the Monthly Payment on a Simple Interest Installment Loan of $100 on page 799 in your textbook).
Amount of Loan ÷ $100 × Monthly Payment for a $100 Loan
$1,259.99 ÷ $100.00 × $8.88 = $111.887 or $111.89
Example 2 Answer: Example 2 Answer: Step 2Step 2
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Find the total amount repaid.
Number of Payments × Monthly Payment
12 × $111.89 = $1,342.68
Example 2 Answer: Example 2 Answer: Step 3Step 3
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Find the finance charge.
Total Amount Repaid – Amount Financed
$1,342.68 – $1,259.99 = $82.69
Example 2 Answer: Example 2 Answer: Step 4Step 4
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A new heating and air conditioner will cost the Sangjun family $4,800. They make a down payment of 20 percent and finance the remaining amount. They obtain an installment loan for 36 months at an APR of 14 percent.
Practice 1Practice 1
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a. What is the down payment?
b. What is the amount of the loan?
c. What are the monthly payments?
d. What is the finance charge?
Practice 1 (cont.)Practice 1 (cont.)
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a. Down payment: $960
b. Amount of the loan: $3,840
c. Monthly payments: $131.33
d. Finance charge: $887.88
Practice 1 AnswerPractice 1 Answer
Simple Interest Installment Loans
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