Section 12.2. Installment Loans. Vocabulary. Installment Loan – a loan that is amortized. This means that both the principal and interest are paid off by a sequence of equal periodic payments. (often used for car loans, etc.)
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1. Find the total installment cost.
= down + payment x number of
payment amount payments
2. Find the finance charge (interest)
= Total installment cost – Cash price
3. Find the amount financed (Principal of loan)
= Cash price – down payment
Robert Chu purchased a new Toyota Prius costing $24,200, including taxes and licensing, with $4000 down and 48 payments of $488.25 each. Find
(a) the total installment cost,
(b) the finance charge, and
(c) the amount financed.
24 x Finance Charge
Amt. Financed x (1 + # of payments)
This is ONLY an estimate for the APR!
Davidson motorcycle costing $26,500. He
financed the purchase at his bank with a
$5000 down payment and payments of
$693.74 for 36 months. Estimate the APR to
the nearest tenth of a percent.
1. Multiply the finance charge by 100, and divide by the amount financed.
2. Find # of payments on left column of table Look to the right until you find the closest value to the # from step 1
3. Look at the top of that column to get the APR.
A refrigerator costing $1450 was financed with $100 down and 20 monthly payments of $74.95 each.
Find (a) the finance charge, (b) amount financed, and (c) the APR.
An insurance agent borrowed $22,500 for new hardware and software for her growing business. She agreed to a note with payments of $858.10 per month for 30 months and put a CD up for collateral instead of making a down payment. Find the APR.