Introduction to Business Ch 26: The Cost of Credit.

Slides:

Advertisements

Similar presentations

Credit is the promise to repay borrowed money (principle) with interest over a certain period of time. Credit cards, mortgages, car loans, student loans,

Advertisements

Cost of credit 18-2.

5.01 Understand credit management.

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 18 SLIDE Credit Fundamentals Cost of Credit.

COMPUTING INTEREST. INTEREST COST IS A MAJOR EXPENSE VARIES WITH INTEREST RATE VARIES WITH THE METHOD USED TO CALCULATE INTEREST.

Earning Credit. Compelling Question Have you ever borrowed money from someone and not repaid it? Or has anyone ever borrowed money from you and not repaid.

Unit 4 - Good Debt, Bad Debt: Using Credit Wisely PG 73.

HOW CREDIT CARDS WORK What you need to know about credit cards- including what credit cards companies can and can’t do, and what information they have.

Credit Costs TODAY YOU WILL... EXAMINE THE COSTS OF CREDIT. 1 ©2014 National Endowment for Financial Education | Lesson 2-2: Credit Costs.

Shopping for an Automobile Loan What Do I Need to Know? Using Standard Calculators.

Chapter 11 Section 2 - Slide 1 Copyright © 2009 Pearson Education, Inc. AND.

10.1 Passbook Savings Account Why do people open savings accounts?  Keep their money safe  Earn interest on their money! Interest: money paid by the.

Copyright 2013, 2010, 2007, Pearson, Education, Inc. Section 11.2 Personal Loans and Simple Interest.

Consumer Math p Definitions  Down payment – part of the price paid at the time of purchase  Financed – borrowed  Mortgage – a property loan.

Name ___________ Date____________ Credit and Debt-Personal Finance pg

8.1 Single Payment Loan Single-Payment Loan Promissory Note

Payday Loans & Credit Cards CENTS. What is a Payday loan?  A Payday loan is a small loan, also known as a “cash advance.” These loans typically become.

1.5 Choosing to borrow money. Why borrow? People’s spending needs change over their personal life cycle so it is often necessary to borrow money by means.

Chapter 4 “going into debt”

 a type of credit that is typically started at the time of purchase for a specific asset  Common for purchases of $1,000 or more  Ex. car, motorcycle.

© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 18 SLIDE Credit Fundamentals Cost of Credit.

Notes Payable and Receivable Making Accounting Relevant Long-term liabilities are reported on a company’s balance sheet. Making Accounting Relevant Long-term.

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

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

Loan a sum of money provided temporarily on the condition that the amount borrowed be repaid, usually with interest Interest the price or fee for using.

Shopping for an Automobile Loan What Do I Need to Know? Using Financial Calculators.

Warm UP Problem Use graphic calculator or website What is the monthly payment and finance charge on the following loan? $3,500 – NO Down Payment 12% 30.

Section 4D Loan Payments, and Credit Cards Pages

Seminar 6 Chapters 8 and 9 Unit 6.

Chapter 4 Loans and Credit Cards.

Interest on Loans Section 6.8. Objectives Calculate simple interest Calculate compound interest Solve applications related to credit card payments.

20.4 Reducing Balance Loans. Reducing balance loans A reducing balance loan is a loan that attracts compound interest, but where regular payments are.

April 9, 2010Math 132: Foundations of Mathematics 8.2 & 8.3 Homework Solutions 459: 35.a. I = (4000)(0.0825)(0.75) = $ b. $4, : 1.A = $10,000(1.

Advantages of using credit cards Ability to use item while paying for it No need to carry cash Use of card builds credit history Quick source of funds.

Learning Objective # 2 Determine the effective cost of borrowing by considering the quoted rate, the number of compounding periods, the timing of interest.

Simple Interest.

Chapter 31 The Cost of Credit. Interest Calculations - Determining Factors  Interest Rates – The percentage that is applied to your debt expressed as.

An agreement to provide goods, services, or money for future payments with interest by a specific schedule; the use of someone else’s money for a fee.

CHAPTER 31 THE COST OF CREDIT. INTEREST CALCULATIONS SIMPLE INTEREST Interest rate x principal x time factor 9% or.09 x $1,000 x 1 year = $90 12% or.12.

Chapter © 2010 South-Western, Cengage Learning Credit in America Credit: What and Why Types and Sources of Credit 16.

Unit 4: Consumer Credit Part 3: Cost of Credit Dollars & Sense.

Truth in Lending Ch Truth in Lending Act  This law was to help consumers protect their credit  It did 2 main things:  Made all banks use.

Credit and loans What do I need to know? Credit card revolving access to a fixed sum of money …revolving…? you can spend up to your credit line whatever.

Calculating Cost Of Credit. Types of Credit Closed-End Credit ◦ One-time loan that you pay back over a specified period of time in payments of equal amounts.

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

Introduction to Business Ch. 25: The Uses of Credit.

Jeopardy Begins with c Loans Poor credit Consumer Credit consumer Finance Q $100 Q $200 Q $300 Q $400 Q $500 Q $100 Q $200 Q $300 Q $400 Q $500 Final.

Shopping for an Automobile Loan What Do I Need to Know? Using Financial Calculators.

Chapter 4 Notes Receivable.

© Nuffield Foundation 2011 Nuffield Free-Standing Mathematics Activity Annual percentage rate with more than one instalment Lower APR.

Hidden Cost of Credit How creditors win and you lose.

Chapter 7 Buying Decisions. Slide 2 Where Can Consumers Get Credit? Credit is the ability to borrow money and pay it back later. 7-2 Getting Started with.

$200 $400 $600 $800 $1000 $200 $400 $600 $800 $1000 $200 $400 $600 $800 $1000 $200 $400 $600 $800 $1000 Lend me the money I have to pay it back? To.

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.

Early Payoff of Loans. Payment is first applied to interest owed. Then,the balance is used to reduce the principal. 1. Find the simple interest due from.

Mortgages. A mortgage is a loan that is secured by property. Mortgages are large loans, and the money is generally borrowed over a large amount of time.

Slide Copyright © 2009 Pearson Education, Inc. AND Active Learning Lecture Slides For use with Classroom Response Systems Chapter 11 Consumer Mathematics.

Loan: a sum of money provided temporarily on the condition that the amount borrowed be repaid, usually with interest Interest: the price or fee for using.

Responsibilities and Costs of Credit

Using Credit Wisely. Credit  Credit is a sum of money a person can use before having to reimburse the credit lender.  It allows a person to receive.

Chapter 7 Buying Decisions. Slide 2 How Can You Be a Responsible Shopper? 7-1 Designing a Buying Plan Use systematic decision making: consider all the.

8.1 Single-Payment Loans Single-Payment Loan: a loan that you repay with one payment after a specified period of time. ◦ A promissory note is one type.

Intro to Business, 7e © 2009 South-Western, Cengage Learning SLIDE1 CHAPTER Credit Fundamentals Cost of Credit Credit Application.

Chapter 18 Section 2 Cost of Credit. Finding Interest Borrowing money has a cost. Interest, I, is the cost of using someone else’s money. To determine.

Lesson 7.2 Credit: Types and Sources

Personal Loans and Simple Interest

Shopping for an Automobile Loan

Allocation of Installment Loans

Fixed Term Loans Buying a Car.

Presentation transcript:

Introduction to Business Ch 26: The Cost of Credit

Interest Calculations Interest Rate – The % that is applied to your debt expressed as a fraction or decimal Principal – The amount of the debt to which the interest rate is applied Time Factor – The length of time for which interest will be charged

Interest Calculations P * R * T = Interest Time – Months – X/12 Days – X/360 Year – X

Interest Calculations P * R * T = Interest Borrow $1000 at 9% for 1 year I = 1000 *.09 * 1 = $90

Interest Calculations P * R * T = Interest Borrow $100 at 12% for 2 years I = 100 * 12/100 or.12 * 2 = 12 * 2 = $24 Owe back $124

Interest Calculations P * R * T = Interest Borrow $500 at 20% for 60 days I = 500 * 20/100 or.2 * 60/360 = 100 * 1/6 = $16.67 Owe back $516.67

Interest Calculations P * R * T = Interest Borrow $1000 at 10% for 4 month I = 1000 * 10/100 or.1 * 4/12 = 100 * 1/3 = Owe back $

Maturity Date Maturity Date – Date on which a loan must be repaid – Examples:Today October 17, 2012 MD is one year – Due Date is October 17, 2013 MD is 6 months – Due Date is April 17, 2013 MD is 180 days – Due Date is ? – 180 – (31-17) = 166 » Nov -30 = 136 » Dec -31 = 105 » Jan -31 = 74 » Feb -28 = 46 » March -31 = 15 » Due Date is April 15

Installment Interest Installment Loan – repay loan in partial payments Installment – Each payment Borrower is given a schedule of payments or a payment book that show how much is to be paid each month

Installment Interest Example: Borrow $100 at 10% for 1 year Interest = 100 *.1 *1 = $10 Owe back $110 Installment = 110 / 12 = $9.16 Our last payment will include the additional 8 cents

Buy a new Car – Borrow $30,000 at 4% for 5 years Interest = *.04 * 5 = 1200 * 5 = 6000 Owe back in 5 years Installments = 36000/60 = $600

Finance Charges Annual Percentage Rate (APR) – States the percentage cost of credit on a yearly basis – Required by law to be disclosed Service Fees – involve the time and money it takes to investigate your credit history, process your loan, keep record of your payments

Finance Charges Credit Insurance – Special insurance that repays the balance of the amount owed if the borrower dies or becomes disabled prior to full settlement of the loan