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Warm Up Problem

Warm Up Problem. Number 11 on page 326 of text book Solution: Ordinary Interest= P x R x (days/360) OI = 21,400 x .085 x 120/360 OI = 606.33 Maturity Value = Principal + Interest 21,400 + 606.33 = 22,006.33. Section 8.2.

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Warm Up Problem

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  1. Warm Up Problem • Number 11 on page 326 of text book • Solution: • Ordinary Interest= P x R x (days/360) • OI = 21,400 x .085 x 120/360 • OI = 606.33 • Maturity Value = Principal + Interest • 21,400 + 606.33 = 22,006.33

  2. Section 8.2 Calculate the down payment and the amount financed on an installment loan

  3. Key Terms • Installment loan- equal payments over a specified period of time. Usually requires a down payment • Down payment- amount required up front to make the credit deal work- remaining amount will be financed (borrowed on credit) • Usually a percentage or set amount • Consider new law changes on home mortgages • Requirements of 20% down payment on a house • Example: 250,000 dollar house would require a down payment of • $50,000

  4. Key formulas • Amount Financed = Cash Price – Down Payment • Down Payment = Cash Price x Percent Requirement • Example one page 308 • Concept Check 1 and 2, page 308 • 1800 • 3800

  5. Example Two page 309 • Concept check 3 and 4 • $272, $1,088 • $517.50, 1,207.50

  6. Closure • What are the effects of making a larger down payment? • Advantages and Disadvantages • If you can’t afford to pay cash, then………….???? • Purpose of Credit – buy now pay later • 20/10 Rule Says…………….. • Decide how much to finance?

  7. Homework • 5, 7, 9, 11, 13, 15, 17, 19, *21 • Page 309-310

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