WWK (pages 83 or 84)
Installment buying ‐ you repay a loan for the cost of a product on a
monthly basis.
Installment loan ‐ a loan you pay off with weekly or monthly
payments, or in some other time period. Product used immediately.
Down payment ‐ money paid at time of purchase
Fixed installment loan ‐ a loan that has a schedule for paying a fixed
amount
Amount financed ‐ amount borrowed
Total installment price ‐ the sum of all monthly payments plus the
down payment
Finance charge ‐ the interest on the installment loan
Annual percentage rate (APR) ‐ interest rate per year
Unearned interest ‐ amount by which the finance charge is reduced
Payoff amount ‐ total amount due on the day that a loan in paid off
early
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TOC pages 91­92 Fixed Installment Loans
Fixed Installment loans
Amount financed ­ Cash price ­ down payment Total installment price = Total of all monthly payments + down payment
Finance Charge = Total installment price ­ cash price.
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Steps in using an APR Table
1) Compute the finance charge per $100 financed
Finance Charge x $100
Amount Financed
2) Look in the row corresponding to the # of payments to be
made (find the entry closet to the value in step 1)
3) Find the APR at the top of the column in which the entry from step 2 is found. (This is the APR rounded to the nearest 1/2%)
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Example l (page 91):
The cost of a new car is $14,000. You can finance the car by paying $280 down and $315 per month for 60 months.
a) Determine the amount financed.
b) Determine the total installment price.
c) Determine the finance charge
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