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
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Slide 2
promissory note
principal
annual percentage rate
cosigner
life insurance
prepayment privilege
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prepayment penalty
wage assignment
wage garnishment
balloon payment
lending institution
collateral
Financial Algebra
© Cengage Learning/South-Western
What information do you need to know before
taking out a loan?
Why is it important to read the fine print in a
promissory note?
How does it affect a bank when a loan is paid
off early?
What type of lending institutions have you
heard of?
Are any of these available locally?
Slide 3
Financial Algebra
© Cengage Learning/South-Western
Table of monthly payments per $1,000 of principal
Slide 4
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 5
Financial Algebra
© Cengage Learning/South-Western
CHECK YOUR UNDERSTANDING
Juan is borrowing $41,000 for 5 years at an APR of
6.5%. What is the monthly payment?
Slide 6
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 7
Financial Algebra
© Cengage Learning/South-Western
CHECK YOUR UNDERSTANDING
The total of monthly payments for a 5-year loan is
$7,171.20. The APR is 7.25%. How much money was
originally borrowed?
Slide 8
Financial Algebra
© Cengage Learning/South-Western
EXAMPLE 3
Find the finance charge for a $4,000, two-year loan with
an 8.5% APR?
Slide 9
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 10
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 11
Financial Algebra
© Cengage Learning/South-Western
CHECK YOUR UNDERSTANDING
Find the monthly payment for a $1,000, one-year loan
at an APR of 7.5%.
Slide 12
Financial Algebra
© Cengage Learning/South-Western