Presentation is loading. Please wait.

Presentation is loading. Please wait.

1. Credit and borrowing Cambridge University Press  G K Powers 2013

Similar presentations


Presentation on theme: "1. Credit and borrowing Cambridge University Press  G K Powers 2013"— Presentation transcript:

1 1. Credit and borrowing Cambridge University Press  G K Powers 2013
Study guide Chapter 1

2 Flat-rate loans I – Interest (simple or flat) earned for borrowing the money P – Principal is the initial amount of money borrowed r – Rate of simple interest per period expressed as a decimal n – Number of time periods A – Amount or final balance HSC Hint – List the data from the question using the correct variables such as P = $12 000, r = 11%, n = 4 Cambridge University Press  G K Powers 2013

3 Table of loan repayments
The interest on a home loan is often calculated per month on the amount of money owing and repayments are made per month. The balance owing after each month becomes the new principal for the next month. Each calculation results in a smaller amount of interest and is called reducible interest. These calculations are often displayed in a table. HSC Hint – Check that the interest (reducible interest) being charged is steadily decreasing Cambridge University Press  G K Powers 2013

4 Future value formula FV – Future value of the loan or amount (final balance) PV – Present value of the loan or principal r – Rate of simple interest per period expressed as a decimal n – Number of compounding time periods I – Interest (compounded) earned for the use of money HSC Hint – Match the time period for r and n: annually, biannually, quarterly or monthly. Cambridge University Press  G K Powers 2013

5 Comparing loans Comparing loans and making the best choice is not simply about choosing a loan with the lowest interest rate. Borrowers need to consider flexibility, fees and the rate. Flexibility is the ability to redraw money and make extra repayments. Comparison rate calculators are available on the internet to compare loans. HSC Hint – Effective interest rate is a rate that takes into account different rates and time periods. Cambridge University Press  G K Powers 2013

6 Credit cards A – Amount owing on the credit card. P – Principal is the purchases made on the credit card plus the outstanding balance. r – Rate of interest per compounding period expressed as a decimal. n – Number of compounding time periods. I – Interest (compounded) earned for the use of money. HSC Hint – Enter the daily interest rate as a fraction into the compound interest formula not as a decimal. Cambridge University Press  G K Powers 2013


Download ppt "1. Credit and borrowing Cambridge University Press  G K Powers 2013"

Similar presentations


Ads by Google