Single Payment Loan­Installment Loan.notebook February 06, 2013 8.1 Single Payment Loans/Installment Loans Single Payment Loan ‐ a loan that you repay with 1 payment after a specified amount of time Promissory Note ‐ a written promise to pay a certain sum of money on a specific date Maturity Value ‐ the total amount you must repay Term ‐ amount of time for which the loan is granted Ordinary Interest ‐ based on a 360‐day year Exact Interest ‐ based on a 365‐day year Installment Loan ‐ a loan with equal payments over a specified period of time Down Payment ‐ a portion of the cash price of the item you are purchasing before financing the rest Amount Financed ‐ the portion of the cash price you owe after the down payment Interest = Principal X Rate X Time Ordinary Interest = Principal X Rate X Time 360 Exact Interest = Principal X Rate X Time 365 Maturity Value = Principal + Interest Amount Financed = Cash Price ‐ Down Payment Down Payment = Cash Price X Percent 1 Single Payment Loan­Installment Loan.notebook February 06, 2013 Your bank granted a single‐payment loan of $7,200 for 91 days to pay for new merchandise for your candle shop. Determine the maturity value of the loan if the rate is (a) 6% ordinary interest or (b) 6% exact interest. Step 1: Find the ordinary interest owed Ordinary Interest = Principal X Rate X Time 360 Step 2: Find the maturity value with ordinary interest Maturity Value = Principal + Interest Step 3: Find the exact interest owed: Ordinary Interest = Principal X Rate X Time 365 Step 4: Find the maturity value with exact interest Maturity Value = Principal + Interest 2 Single Payment Loan­Installment Loan.notebook February 06, 2013 Find the (a) interest and (b) maturity value for each loan. 1) A new sound system costing $600 and financed at 9% with ordinary interest for 90 days. 2) A tack room to a barn costing $4,850, financed at 7% exact interest for 120 days. 3 Single Payment Loan­Installment Loan.notebook February 06, 2013 You decided to take out a single payment loan for $1,500 at 7.8% ordinary interest to pay your federal income tax bill. If the loan's maturity value is $1,529.25, when would you have to pay the loan back if you took it out on March 1st? Step 1: Find the interest Maturity Value = Principal + Interest Step 2: Find the time of the loan in days Ordinary Interest = Principal X Rate X t 360 4 Single Payment Loan­Installment Loan.notebook February 06, 2013 How long would it take a construction loan for $548,048 to earn interest of $50,000 at 9% exact interest? 5 Single Payment Loan­Installment Loan.notebook February 06, 2013 You are buying gym equipment for $1,399. You make a $199 down payment and finance the rest. How much do you finance? Find the amount financed: Cash Price ‐ Down Payment 6 Single Payment Loan­Installment Loan.notebook February 06, 2013 You purchased season concert tickets for $1,999.99. The down payment is $199.99. Find the amount financed. 7 Single Payment Loan­Installment Loan.notebook February 06, 2013 You purchased a previously owned piano for $1,140 using the store's installment credit plan. You made a 20% down payment and financed the rest. How much did you finance? Step 1: Find the 20% down payment Step 2: Find the amount financed 8 Single Payment Loan­Installment Loan.notebook February 06, 2013 Find the down payment and amount financed. 1) You purchased an antique chest for a $1,360 cash price. You made a 20% down payment. 2) You bought a bracelet for $1,725. The down payment was 30%. 9 Single Payment Loan­Installment Loan.notebook February 06, 2013 Pg 307: 4‐12 even Pg 309: 6‐20 even 10