Warm Up Problem

• Number 11 on page 326 of text book

• Solution:– Ordinary Interest= P x R x (days/360)– OI = 21,400 x .085 x 120/360– OI = 606.33– Maturity Value = Principal + Interest– 21,400 + 606.33 = 22,006.33

Section 8.2

Calculate the down payment and the amount financed on an installment

loan

Key Terms

• Installment loan- equal payments over a specified period of time. Usually requires a down payment

• Down payment- amount required up front to make the credit deal work- remaining amount will be financed (borrowed on credit) – Usually a percentage or set amount– Consider new law changes on home mortgages – Requirements of 20% down payment on a house– Example: 250,000 dollar house would require a down

payment of – $50,000

Key formulas

• Amount Financed = Cash Price – Down Payment

• Down Payment = Cash Price x Percent Requirement

• Example one page 308• Concept Check 1 and 2, page 308– 1800– 3800

Example Two page 309

• Concept check 3 and 4• $272, $1,088• $517.50, 1,207.50

Closure

• What are the effects of making a larger down payment?

• Advantages and Disadvantages• If you can’t afford to pay cash, then………….????• Purpose of Credit – buy now pay later• 20/10 Rule Says……………..• Decide how much to finance?

Homework

• 5, 7, 9, 11, 13, 15, 17, 19, *21 • Page 309-310