Slide 1

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







Slide 2

promissory note
principal
annual percentage rate
cosigner
life insurance
prepayment privilege








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, two-year 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 

r 
 r 
p
 1 

12 
 12  
r 

1

12 


12 t

12 t

1

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, one-year loan
at an APR of 7.5%.

Slide 9

Financial Algebra
© Cengage Learning/South-Western


Slide 2

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







Slide 2

promissory note
principal
annual percentage rate
cosigner
life insurance
prepayment privilege








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, two-year 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 

r 
 r 
p
 1 

12 
 12  
r 

1

12 


12 t

12 t

1

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, one-year loan
at an APR of 7.5%.

Slide 9

Financial Algebra
© Cengage Learning/South-Western


Slide 3

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







Slide 2

promissory note
principal
annual percentage rate
cosigner
life insurance
prepayment privilege








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, two-year 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 

r 
 r 
p
 1 

12 
 12  
r 

1

12 


12 t

12 t

1

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, one-year loan
at an APR of 7.5%.

Slide 9

Financial Algebra
© Cengage Learning/South-Western


Slide 4

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







Slide 2

promissory note
principal
annual percentage rate
cosigner
life insurance
prepayment privilege








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, two-year 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 

r 
 r 
p
 1 

12 
 12  
r 

1

12 


12 t

12 t

1

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, one-year loan
at an APR of 7.5%.

Slide 9

Financial Algebra
© Cengage Learning/South-Western


Slide 5

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







Slide 2

promissory note
principal
annual percentage rate
cosigner
life insurance
prepayment privilege








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, two-year 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 

r 
 r 
p
 1 

12 
 12  
r 

1

12 


12 t

12 t

1

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, one-year loan
at an APR of 7.5%.

Slide 9

Financial Algebra
© Cengage Learning/South-Western


Slide 6

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







Slide 2

promissory note
principal
annual percentage rate
cosigner
life insurance
prepayment privilege








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, two-year 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 

r 
 r 
p
 1 

12 
 12  
r 

1

12 


12 t

12 t

1

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, one-year loan
at an APR of 7.5%.

Slide 9

Financial Algebra
© Cengage Learning/South-Western


Slide 7

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







Slide 2

promissory note
principal
annual percentage rate
cosigner
life insurance
prepayment privilege








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, two-year 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 

r 
 r 
p
 1 

12 
 12  
r 

1

12 


12 t

12 t

1

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, one-year loan
at an APR of 7.5%.

Slide 9

Financial Algebra
© Cengage Learning/South-Western


Slide 8

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







Slide 2

promissory note
principal
annual percentage rate
cosigner
life insurance
prepayment privilege








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, two-year 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 

r 
 r 
p
 1 

12 
 12  
r 

1

12 


12 t

12 t

1

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, one-year loan
at an APR of 7.5%.

Slide 9

Financial Algebra
© Cengage Learning/South-Western


Slide 9

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







Slide 2

promissory note
principal
annual percentage rate
cosigner
life insurance
prepayment privilege








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, two-year 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 

r 
 r 
p
 1 

12 
 12  
r 

1

12 


12 t

12 t

1

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, one-year loan
at an APR of 7.5%.

Slide 9

Financial Algebra
© Cengage Learning/South-Western