WARMUP Ignore the additional payment for your calculations

WARMUP Ignore the additional payment for your calculations a) b) c) d) e) Slide 1 What is the loan amount What is the monthly payment What is the interest rate What is the length of the loan How much interest is paid over the entire loan Financial Algebra © Cengage Learning/South-Western

4 -1 to 4 -3 Consumer Loan Wrapup OBJECTIVES Review the topics we covered Create step-by step details for each type of calculation Slide 2 Financial Algebra © Cengage/South-Western

Installment loan 1. If necessary, find the down payment by multiplying price times % as a decimal 2. Multiply monthly payment times number of months - number of months is years times 12 3. Add total monthly payments to down payment 4. Then subtract loan amount Slide 3 Financial Algebra © Cengage Learning/South-Western

Promotional loan Finding last payment 1. Multiply monthly payment times number of months minus 1 - number of months is years times 12 2. Subtract loan amount minus monthly payments Finding equal payments 1. Divide price by number of months Slide 4 Financial Algebra © Cengage Learning/South-Western

Find the finance charge or interest owed 1. Multiply monthly payment times number of months - number of months is years times 12 2. Then subtract loan amount Slide 5 Financial Algebra © Cengage Learning/South-Western

Finding monthly payment using table 1. Rate and term must be on table 2. Find monthly payment 3. Multiply monthly payment by number of thousands being borrowed Slide 6 Financial Algebra © Cengage Learning/South-Western

Table of monthly payments per $1, 000 of principal Slide 7 Financial Algebra © Cengage Learning/South-Western

Finding monthly payment using formula P = Amount borrowed r = interest rate (decimal) t = number of years Slide 8 Financial Algebra © Cengage Learning/South-Western

Finding monthly payment using calculator 1. 2. 3. 4. Hit Apps “ 1: Finance” is highlighted so hit ENTER “ 1: TVM Solver” is highlighted so hit ENTER Fill in the following: N = number of payments I% = interest rate as percent PV = loan amount PMT = CLEAR FV = 0 P/Y = 12 C/Y = 12 5. Hit ALPHA+ENTER Slide 9 Financial Algebra © Cengage Learning/South-Western

Finding loan length 1. 2. 3. 4. Hit Apps “ 1: Finance” is highlighted so hit ENTER “ 1: TVM Solver” is highlighted so hit ENTER Fill in the following: N = CLEAR I% = interest rate as percent PV = loan amount PMT = input as negative FV = 0 P/Y = 12 C/Y = 12 5. Hit ALPHA+ENTER Slide 10 Financial Algebra © Cengage Learning/South-Western

Analyzing amortization schedule Monthly payment is Principal + Interest Rate: 1. Loan amount divided by interest payment 2. Multiply by 12 3. Write as % Slide 11 Financial Algebra © Cengage Learning/South-Western