Loans Paying back a borrowed amount (A n )in n regular equal payments(R), with interest rate i per time period is a form of present value annuity. Rewrite.

Slides:

Advertisements

Similar presentations

Copyright © 2011 Pearson Education, Inc. Managing Your Money.

Advertisements

Example 5 Home Mortgage Chapter 5.6 A couple that wants to purchase a home with a price of $230,000 has $50,000 for a down payment. If they can get a 25-year.

Building an Amortization Schedule How the banks do it and what we need to know…

Simple Interest I =Prt I = Interest P = Principle r = rate t = time

1 Chapter 05 Time Value of Money 2: Analyzing Annuity Cash Flows McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Finite Mathematics: An Applied Approach by Michael Sullivan Copyright 2011 by John Wiley & Sons. All rights reserved. 6.4 Present Value of an Annuity;

Chapter 5 Section 5.4 Amortized Loans. An amortized loan is a type of investment (for the loaner) in which the amount of the loan, plus the interest is.

Debt 1. Interest rate: Annual Percentage Rate APR 2.

Minds On: Future Value Tom and Beth are twins. They save for retirement as follows: – Starting at age 25, Tom deposits $1000 at the end of each year for.

Why is the time value of money an important concept in financial planning?

Regular Deposits And Finding Time. An n u i t y A series of payments or investments made at regular intervals. A simple annuity is an annuity in which.

Q3: Ms. Rigsby made a $40,000 down payment on a $165,000 house and took out a 20 year mortgage (at 6% compounded monthly) on the balance. How much will.

Valuation of standardized cash flow streams – Chapter 4, Section 4.4 Module 1.4 Copyright © 2013 by the McGraw-Hill Companies, Inc. All rights reserved.

Discounted Cash Flow Valuation.  Be able to compute the future value of multiple cash flows  Be able to compute the present value of multiple cash flows.

Annuity Payments LG: I can calculate the payment of an annuity in present value and future value situations.

MATH 102 Contemporary Math S. Rook

Chapter 9 Time Value of Money © 2000 John Wiley & Sons, Inc.

Pg. 282 Homework Worksheet#4 – 6 Pg. 268#15 – 18, 29, 41, 47 – 49 #1 6% quarterly#28.25% monthly #3 7.20% daily#48.5% quarterly #5 $36,013.70#6$13,

Section 4C Loan Payments, and Credit Cards Pages C.

The Cost of Credit BBI2O Introduction To Business Unit 3: Finance 3.D Credit.

Section 1.1, Slide 1 Copyright © 2014, 2010, 2007 Pearson Education, Inc. Section 8.5, Slide 1 Consumer Mathematics The Mathematics of Everyday Life 8.

Worksheet/Pg. 269/277 Homework

Section 4D Loan Payments, and Credit Cards Pages

Find the monthly payment R necessary to pay off a loan of $90,000 at 5% compounded monthly for 30 years. (Round final answer up to the nearest cent.) MATH.

Amortized Loans An amortized loan is a loan paid off in equal payments – consequently, the loan payments are an annuity. In an amortized loan:

Honey, I shrunk the mortgage! How to correctly pre-pay your mortgage, and save the interest!

1 Chapter 05 Time Value of Money 2: Analyzing Annuity Cash Flows McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Quick answers If the bank is offering 12% per year compounded quarterly what would be the value of “i” in the Amount of an annuity formula? If the Nicole.

Future Value of an Ordinary Simple Annuity Annuity - Series of equal payments or deposits earning compound interest and made at regular intervals over.

Present Worth of Annuities make equal payments The present value of an annuity that pays out n regular payments of $R at the end of each time period from.

People shouldn’t solely rely on their financial institutions to financially plan and manage their mortgage. Homeowners need to become educated consumers.

Number of Payments Interest Rate Amount Borrowed Monthly Payment Total Cost of Interest Creditor A7214%$7,500.00$154.54$3, Creditor B6014%$7,500.00$174.51$2,

3.3 Personal Finance. Compound Interest Steady Withdrawal/Deposits x x.

Today in Precalculus Go over homework Need a calculator Notes: Loans & Mortgages (Present Value) Homework.

Pg. 282/292 Homework Study #7$ #15$ #17$ #1x = 2 #2x = 1#3x = 3 #4x = 4 #5x = -4 #6x = 0 #7no solution #8x = 2 #9Graph #10Graph #11Graph.

Pg. 301 Homework Pg. 309#25 – 39 odd Pg. 312#53 – 54 Pg. 311#1 – 12 all #1x = 10,000#2x = 1/e#3x = 5.25 #4x = ½ #5x = 97#6x = 1001 #7x = 16#8x = 531,434#9x.

Discounted Cash Flow Valuation Multiple Cash Flows We have dealt with lump sums We have dealt with lump sums What if there is more than one cash flow?

11.2 Exponential Functions. General Form Let a be a constant and let x be a variable. Then the general form of an exponential function is:

Chapter 9 Time Value of Money © 2011 John Wiley and Sons.

Copyright © 2011 Pearson Education, Inc. Managing Your Money.

Annuities, Loans, and Mortgages Section 3.6b. Annuities Thus far, we’ve only looked at investments with one initial lump sum (the Principal) – but what.

The amount of money either being borrowed or saved A %, that will need to be converted into a decimal The amount of time in years Compound Interest A =P(1.

Determine the amount saved if $375 is deposited every month for 6 years at 5.9% per year compounded monthly. N = 12 X 6 = 72 I% = 5.9 PV = 0 PMT = -375.

LECTURE 6 Quiz #6 If you are going to finance the purchase of a car, would you want the interest on your loan be compounded daily, monthly, quarterly,

FIN 614: Financial Management Larry Schrenk, Instructor.

Aim: Money Matters: Amortization Course: Math Literacy Aim: How does money matter? Annuities in reverse: Amortization! Do Now:

Ms. Young Slide 4-1 Unit 4C Loan Payments, Credit Cards, and Mortgages.

10/23 More interest Compound interest formula A =.

Aim: Money Matters: Home Ownership Course: Math Literacy Aim: How does money matter? Home ownership – the big Kahuna! Do Now:

Real Estate Loans.  Payment = (loan amount ÷ 1000) x table value  Use REAL ESTATE amortization table found on p Because this table lists the principal.

Annuities By Jordan Moncada. ANNUITY  A series of payments made in equal intervals (loans, retirement plans, etc.)

Understanding Car Payments. Mark wants a go-cart. Mark wants a go-cart. A go-cart costs $500. A go-cart costs $500. Mark only has $100. This is his Down.

Chapter 5 Time Value of Money. Basic Definitions Present Value – earlier money on a time line Future Value – later money on a time line Interest rate.

Section 13.2 Loans. Example 8 Find the future value of each account at the end of 100 years if the initial balance is $1000 and the account earns: a)

Personal Property Loans.  Personal property: Items that can be moved from one location to another. (i.e., car, boat, stereo…)  Real Estate: Land and.

Annuities; Loan Repayment  Find the 5-year future value of an ordinary annuity with a contribution of $500 per quarter into an account that pays 8%

Lesson 2 – Annuities Learning Goal I can solve for the future value of an annuity.

Calculating interest You can calculate the time value of your savings by figuring out how much interest you will earn. Principal – the original amount.

Exponential and Logarithm Functions

Business Finance (MGT 232)

MATH 110 Sec 8-5 Lecture: Annuities – Amortization

Example 4 Annuities Show that if regular payments of $1000 are made at the end of each year for 5 years into an account that pays interest at 10% per year.

Lesson 6 Regular Annuities-Future Value

Lesson 2 The amount of an Annuity

Lesson 6: Regular Payment of an Annuity

Lesson #7: Regular Annuities- Present Value

Chapter 6 Lesson 4 PMT Function.

WARMUP George is getting a loan to buy a car. He will borrow $17,000 for 4 years at 7.2%. What are his monthly payments? How much in finance charges.

Presentation transcript:

Loans Paying back a borrowed amount (A n )in n regular equal payments(R), with interest rate i per time period is a form of present value annuity. Rewrite present value equation to get the size of each payment.

Example 1 You plan to borrow $20,000 for 4 years. What is the monthly payment if the current APR for car loans is 6%? How much are you paying in interest for this loan? in interest for this loan.

Example 2 A couple takes out a 30 year mortgage to borrow $ at 4.2%, compounded monthly. What is their monthly mortgage payment? Amortization schedule details payment breakdown.

Example 2 - continued Currently paying: If the couple pays an extra $100 per month, how much would they save in interest? in interest. Now paying: in interest.