1. OBJECTIVES 4-2 LOANS Read monthly payments from a table.
Banking
4/6/2017
4-2 LOANS
OBJECTIVES
Read monthly payments from a table.
Compute monthly payments using a formula.
Compute finance charges on loans.
Chapter 1

2. Key Terms promissory note principal annual percentage rate cosigner
life insurance
prepayment privilege
prepayment penalty
wage assignment
wage garnishment
balloon payment
lending institution
collateral

3. Example 1
What is the monthly payment for a $4,000 two-year loan with an APR of 8.50%?

4. Example 2
What is the total amount of the monthly payments for a $4,000, two-year loan with an APR of 8.50%?

5. Find the finance charge for a $4,000, two-year loan with an 8.5% APR?
EXAMPLE 3
Find the finance charge for a $4,000, two-year loan with an 8.5% APR?

6. CHECK YOUR UNDERSTANDING
Karl is borrowing x dollars over a three-year period. The monthly payment is y dollars. Express his finance charge algebraically.

7. Monthly Payment Formula
M = monthly payment
p = principal
r = interest rate
t = number of years

8. EXAMPLE 4
Mark bought a new car. The total amount he needs to borrow is $28,716. He plans on taking out a 4-year loan at an APR of 5.12%. What is the monthly payment?

9. CHECK YOUR UNDERSTANDING
Find the monthly payment for a $1,000, one-year loan at an APR of 7.5%.