Amount Financed: what the consumer borrows
amt financed = cash price ­ down payment
Total Installment Price=
(monthly payment)(number of months) + down payment
Finance Charge: interest on the installment loan:
finance charge = total installment price ­ cash price
1
Ex 1) The cost of a car is $9345. We can finance the
truck by paying $300 down and $194.38 per month for
60 months.
a. determine the amount financed
9345 ‐ 300 = 9045
b. determine the total installment price
194.38x60 + 300 = 11962.80
c. determine the finance charge
11962.80 ‐ 9345 = 2617.80
2
Balance Due On a Credit Card
Interest Rate I = Prt (P = unpaid ‐ payments)
Total Balance Due on Credit Card
(unpaid ‐ payments) + interest + charges made
3
Balance due on Credit Card
A VISA card calculated interest using the unpaid balance method. The
monthly interest rate is 1.3% on the unpaid balance on the first day of
the billing period less payments and credits. Here are some of the
details in the May 1 ­ May 31 itemized billing:
May 1 unpaid Balance: $1350
Payment Recieve May 8: $250
Purchases Charged to the VISA account:
Airline tickets $375
Books $57
Meals $65
Last Day of the Billing Period: May 31
Payment Due Date: June 9
a. Find the interest due on the payment due date
b. Find the total balance owed on the last day of the billing period
c. This credit card requires a $10 minimum monthly payment if the total
balance owed on the last day of the billing period is less that $360.
Otherwise, the minimum monthly payment is 1/36 of the balance owed
on the last day of the billing period, rounded to the nearest whole
dollar. What is the minimum monthly payment due by Jen 9
4
Home Ownership
Down Payment = rate x price
Amount of Mortgage = price ‐ down payment
Points = points as a percent x amt of mortgage
Monthly Payment Formula:
PMT = PV r/n
1 ‐ (1+(r/n))‐nt
Total Interest = monthly payment x # of pymts ‐ mortgage amount
5
The price of a home is $195,000. THe bank requires a 10% down payment and two points at the time of closing. The cost of the home is financed with a 30‐year fixed‐rate mortgage at 7.5%.
a. Find the down payment
b. Find the amount of the mtg
c. How much must be paid for the two points at closing?
d. Find the monthly pymt
e. Find the total interest paid over 30 years.
6
Homework: pg 435 #1,3,15
pg 444 #2
7