SECTION 8-1 Single-Payment Loans pp. 284-286

Key Words to Know single-payment loan (p. 284) A loan that has to be repaid with one payment after a specified period of time. promissory note (p. 284) A written promise to pay a certain sum of money on a certain date in the future.

Key Words to Know maturity value (p. 284) The total amount that must be repaid on a loan, including the principal borrowed and the interest owed. term (p. 284) The amount of time for which a loan is granted before it has to be repaid.

Key Words to Know ordinary interest (p. 284) Interest on a loan calculated by basing the time of the loan on a 360-day year. exact interest (p. 284) Interest on a loan calculated by basing the time of the loan on a 365-day year.

Formula 1 Interest = Principal × Rate × Time

Formula 2 Ordinary Interest = Principal × Rate × Time ÷ 360 Exact Interest = Principal × Rate × Time ÷ 365

Formula 3 Maturity Value = Principal + Interest Owed

Example 1 Anita Bonita bank granted her a single-payment loan of $7,200 for 91 days at 12 percent ordinary interest. What is the maturity value of the loan?

Example 1 Answer: Step 1 Find the ordinary interest owed. Principal × Rate × Time $7,200.00 × 12% × 91/360 = $218.40

Example 1 Answer: Step 2 Find the maturity value. Principal + Interest Owed $7,200.00 + $218.40 = $7,418.40

Example 2 Anita Sloane’s bank granted her a single-payment loan of $7,200 for 91 days at 12 percent exact interest. What is the maturity value of the loan?

Example 2 Answer: Step 1 Find the exact interest owed. Principal × Rate × Time $7,200 × 12% × 91/365 = $215.408 or $215.41

Example 2 Answer: Step 2 Find the maturity value. Principal + Interest Owed $7,200.00 + $215.41 = $7,415.41

Practice 1 Single payment loan of $2,750. Interest rate of 11 percent. Exact day of interest: 50. What is the interest owed?

Practice 1 Answer $41.44

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