4 2 LOANS OBJECTIVES Read monthly payments from

4 -2 LOANS OBJECTIVES Read monthly payments from a table. Compute monthly payments using a formula. Compute finance charges on loans. Slide 1 Financial Algebra © Cengage/South-Western

Key Terms l promissory note l principal l annual percentage rate l cosigner l life insurance l prepayment privilege Slide 2 l l l prepayment penalty wage assignment wage garnishment balloon payment lending institution collateral Financial Algebra © Cengage Learning/South-Western

Example 1 What is the monthly payment for a $4, 000 two-year loan with an APR of 8. 50%? Slide 3 Financial Algebra © Cengage Learning/South-Western

Example 2 What is the total amount of the monthly payments for a $4, 000, two-year loan with an APR of 8. 50%? Slide 4 Financial Algebra © Cengage Learning/South-Western

EXAMPLE 3 Find the finance charge for a $4, 000, twoyear loan with an 8. 5% APR? Slide 5 Financial Algebra © Cengage Learning/South-Western

CHECK YOUR UNDERSTANDING Karl is borrowing x dollars over a three-year period. The monthly payment is y dollars. Express his finance charge algebraically. Slide 6 Financial Algebra © Cengage Learning/South-Western

Monthly Payment Formula M = monthly payment p = principal r = interest rate t = number of years Slide 7 Financial Algebra © Cengage Learning/South-Western

EXAMPLE 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? Slide 8 Financial Algebra © Cengage Learning/South-Western

CHECK YOUR UNDERSTANDING Find the monthly payment for a $1, 000, oneyear loan at an APR of 7. 5%. Slide 9 Financial Algebra © Cengage Learning/South-Western